Moody's Talks - Inside Economics - Claudia Sahm on the Muddling Economy

Episode Date: October 24, 2025

Claudia Sahm, Chief Economist at New Century Advisors, joins Inside Economics to discuss a bevy of topics, including today’s belated Consumer Price Index release, the lack of other government data, AI and the labor market, stock market valuations, and the risks to the economy that are top of mind for her. Mark teases a new esoteric vocabulary word but fails to reveal it…stay tuned.Guest: Claudia Sahm – Chief Economist, New Century AdvisorsFor more from Claudia Sahm, check out her Substack here: https://substack.com/@stayathomemacroGuest: Matt Colyar – Assistant Director, Moody's AnalyticsHosts: 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' and BlueSky @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 Sandy, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeRides, Marissa D. Natali. Hi, guys. Hi, Mark. Good morning, Mark. You know, I got a message, I guess it was an email. I don't know what it means to get a message, but I got an email from a listener saying that

that they don't know enough about us. And I think what they meant is they don't know enough about you guys, because I'm an open book. People know everything about me. And I'm pretty boring. So there's nothing to know about me. So I thought we'd begin this podcast by each of you telling us something about yourself. Oh, by the way, she acknowledged.

She knows Chris is a crypto investor and a very good one. She knows that. Who doesn't? She knows, Marissa, that you're good at pickleball or kind of that you play pickleball. play out there yeah okay so what else don't what else i are you as boring as i am and like there's nothing else to know or is like this what else would you throw into the mix that's help people understand who you are just ask them no well marissa's pickleball is actually grounded in uh that's grounded in reality right my crypto persona is completely fictitious i'll just get that out wait now don't come on now

You're telling me you're not a crypto king? Is that what you're saying to me? You know, I'm going to disappoint a lot of fans, but that's the reality. Oh, damn, now you're making it worse, Chris. Now, now everybody's exciting economists, and now you're this boring economy. Are you telling us you're just boring, boring economists? Well, why don't we talk about your operatic career, right? You know, on the weekends, I hear that you're a tenor.

Really? You've heard that? Where did that come from? You're making that up. I think the same place where the crypto came up. Very good. Okay, so dear listener, you can hear these guys aren't going to give anything up, right? So I tried.

I tried my best. I tried my best. Now, Matt, Matt Collier, our colleague Matt Collier is also with us. Hey, Matt. Hey, Mark. Hey, everybody. Nice to be here. Yeah.

Matt, are you as boring as the rest of us? Are you? No, no, I'm fascinating. You're fascinating. You're fascinating. Oh, really? Oh, okay. What makes you fascinating?

Just anything in... No, I'm pretty boring, too. But I use myself, I guess, is enough. Well, one thing I just learned you moved out near me. You're in Malvern, PA now? That's right. The heart of Chester County. Do they call it that?

The heart of Chester County. They do now. Do they now? Yeah. Great spot. This is where Vanguard is located. Yeah, I'm very close to Vanguard. Oh, are you?

I'm not divulging too much personal information. But yeah. everybody in my neighborhood works at vanguard yeah yeah me too me too yeah we have a guest claudia saum claudia yeah happy to be here thank you so are you as boring as the rest of us it says you get a bunch of dorky economists together it's like a race to the bottom of boring um yeah no i think my my big victory for this year is i beat cancer like that's It's been my, you know, and I'm in recovery. So the short hair do is growing.

So that, you know, I had a real wake up call and like health is the great equalizer. You know, be really thankful. So I'm very happy to be here and be back, you know, doing the good stuff. But so I would like more boring, right? Like no surprises, no. Also in the economy, boring economy would be super. I don't think we're going to get that. I'm a little more confident about my health outlook than the economy.

Or policy. Well, that's great. I'm glad all as well. You look great. That's great. So you kind of navigated through, so that's good. Yep. Hopefully the economy does too.

Yes. Navigates through. You're also an advisor to New Century. Are you on New Century Advisors? What's your relationship? So I'm the, so I'm a chief economist for about a year and a half now at New Century Advisors. So they're a small investment firm based in D.C., which is where I'm based in. in the D.C. area.

And their special, their longstanding specialty has been in fixed income. So lots of treasury, tips, bonds. So it just, you know, it was a relationship kind of by happenstance, really connecting with the woman founder Ellen Sapphire, just as, you know, she noticed some of my work and kind of talking. And so having a lot of background, having thin at the Fed, spend a lot of time thinking about the Fed and then macro outlook. It's just been a really great place for me to,

it's a small shop. I'm learning more about markets. It's learning, you know, how they respond to data and kind of thinking about the Fed. So it's, you know, again, I'm pretty much, I'm a newbie in the private space, but it's, it's been an interesting experience so far. Yeah, I find that I can talk to fixed income investors. I mean, we kind of think and are in the same kind of space and world. It feels natural.

Equity investors I have a harder time with. I don't know about you. Yeah. No, no, it's kind of that, like, having been. at the Fed, it's a lot of like, oh, the latest data and then what does that mean and thinking about the forecast. I never had to then say, well, how do the markets react to this? Like, it doesn't make sense what they do. And there are oftentimes where I'll pick up a GDP release and look at some detail. And I'm like, oh, yeah, you know, that's not a big deal because PDF piece, fine,

blah, blah, blah. And then I'll look at with the stock market. I'm like, whoa, it's like, calm down. Whereas I agree with you. I think the bond market processes some of the information in a more similar way, but that could also be that they're much more thinking through as the Fed does. You know, like, it's all the, the data don't speak for themselves. You do have to interpret and filter and the models you use. But, yeah, the stock market, I have a hard time with the, I mean, markets in general. If you look at the 10-year treasury yield, you know, is your benchmark, you know, fixed income benchmark. I mean, it seems the message there is much cleaner and clearer, right? I mean, if you look at the S&P 500, it could be a gazillion things going.

on hard to disentangle. Yeah. And, you know, easier, relatively speaking. Relatively. You know, it's hard because the, because the market's not like an entity, just like the economy isn't an entity. It's the aggregation of all the different viewpoints, narrative strategies. You know, so you have to be a little, I mean, I think that's been a good lesson.

You know, the storytelling with the economy, you've got to be careful, you know, just telling the story off the aggregates. And I think that's the same thing with markets. because you can tell a lot of stories. They can often just be different store kind of cross-cutting, you know, and it all adds up. So, no, it's been an interesting process. It definitely keeps the brain busy. So are you experiencing withdrawal here with no government data?

I mean, how are you grappling with that? What do you, what are you looking at to try to gauge how things are going? So it's very unsettling. Unsettling. Right. I think that's the piece is I am a huge fan of. of data, as I'm sure everyone in this conversation are. But it's like we're missing the core.

Like I really do appreciate it. And when I was at the Fed, I worked on helping build alternative statistics using private sector, big data. I think there's a lot of you can get more granularity, more timeliness, you can dig it. Like there can be really exciting supplements, compliments to the federal statistics. but it is just not a satisfying, like, core. Like, I really just feel like it's hard to interpret and get a good sense. And I'm unsettled because we knew going that there's their risks.

And we potentially could be at a point of, you know, the labor market really taking a leg down and to not be getting the data to test. Yeah. I just don't have a good feeling about it. And the problem is, you know, we've had a month of not getting the data released. And it was very exciting. We got a CPI, you know, release us. We have like this little shred of data.

But even, you know, it's hard to interpret one piece of data without the whole constellation of economic data, like the employment data, the spending data. You know, and so that and then knowing that we, the data will be severely disrupted for months to come. And the idea that the fourth quarter could really be a wash in terms of federal statistics of any, like, role, having confidence in them is like, it's really bad timing. Unsettling. And so I have to tell you, Marissa's never been, hasn't been the same in the last 22 days. I mean, it's true. Yeah.

It's like she's kind of losing it. You know, we have to keep her calm. Keep her calm. Although she got, as you said, we got a little bit of something today with the consumer price index, the CPI. And we got Matt here. And he's going to go over those in just a minute. But I did want to ask you, did you see that ADP, you know, the

folks that produced the, uh, uh, an estimate of employment, uh, decided not to continue providing that data to the federal reserve.

Did you see that? I saw the news reporting on that. And I'm not surprised. Like I, like I said the, these alternative data that come out of the private sector, they can be extremely useful. And I think there's a lot of

promise. And going forward, you know, a lot of the, the, the federal statistics rely on surveys and we're just not going to be able to rely to the same extent. Again, it becomes cost prohibitive. So we've got to find ways to utilize different kinds of data and build collaborations and the future will be different than the present. But I've been always very skeptical, people who are like the nirvana of like,

oh, we don't need the federal statistics. We can do it all through the private sector. And look, ADP is better than the employment statistics. But the thing is, at the end of the day, and I mean, I've, you know, since working at the Fed on these kinds of projects and working with, the companies and then you know i've been writing like i've bloomberg pieces this year on this too private companies do not create public goods and government statistics are public goods so adp does you know and i'm not like i don't fault adp for pulling the feds data there they are a private company

they have clients they have shareholders right like they there is some kind of business decision and they're being pretty quiet about exactly what it is in the Fed. This is, I'm sure, not something they want to have a big discussion in the press about. Right. But it's like you can't expect a private company to put the public good first. Like, that's not what they do, right? And so it creates with the statistics, we need reliability, continuity. And it is a real problem for the federal, you know, the government agencies.

if they bring private data into their toolkit to like create, like the CPI has a lot more private data in it than it used to. Like you need some like guaranteed that you're going to keep having access to it and the costs aren't going to go through the roof. Or you can have a private company that the CEO just decides to go in a different direction that I don't want to publish any data. You know, and so it's like we haven't quite got the institutional arrangements figured out. And so these kind of.

of data products that pop up, they can be very useful, but you can't bank on them. And it is extreme, like, I think that ADP kerfuffle with the Fed, like this is shining a light on some of the difficulties, the challenges. We don't have these institutional kind of, we haven't figured this out, but oh my goodness, talk about bad timing. Yeah. Right, because I was feeling a little better being like, well, and I knew the team that put together the ADP microdict, because the Fed wants to see how the numbers are put

together. They want more transparency than just like, oh, the company has the numbers. Oh, well, they still have their weekly data. I was like, oh, no, they don't. So again, unsettled. I assume we're still going to get the monthly data from ADP. And again, they're the payroll processing from a human resource company. And they have a very good sense of what's going on in the labor market because they do payroll processing for a lot of companies. And they were providing this data on a weekly basis to the Fed. But that's what's but I'm assuming that they're going to continue. That's the weekly basis, but, you know, they would have had multiple weeks after the last

ADP monthly report before, you know, next week's meeting. Yeah. So, and I think there's a, given the fact that December meeting is pretty early in the month for the Fed, you know, and the shutdown is nowhere. Like, it's going to get pretty dicey in terms of data, you know, before the Fed meets in December. So, yeah, but it, but it does shine a light on, you know, we're not, we are not ready for the private sector to take over the economic data wholesale, even the best. And the ADP has done a lot of

great work. And I, you know, really, again, I don't want to be critical of them because I think they've done a lot to put their information out into the public. And partnered with the Fed, and that's been very productive for the Fed. It's just we're not quite ready to do that wholesale shift. Well, fortunately, we got one data point from the Bureau of Labor Statistics, the Consumer Price Index. We were talking about this last week on the podcast, and here we are. We got it. So, Matt, would we learn? Well, one, to reiterate everything here was great just to have a big government report to come through and get a sense of what the inflation environment looks like because we haven't seen anything in a while. So consumer price index rose 0.31% from August to September. That's just about exactly where we, where consensus

expected the monthly increase to come in at. That lifted the year ago rate from 2.9% to 3%. Again, that's falling in line with where everybody's expectations were for the months report. Energy prices were a big driver this month, big increase 1.5%. That may seem counterintuitive given what the general trend in energy markets has been since. So we have lower gas prices since, but that changed from August to September is what's

being bed into this monthly change. that was there was a pretty solid increase, so 4.1% rise in the CPI for gas. Energy services, which captures electricity, has gotten a lot of attention, mostly downstream of how much power, how much demand the data,

the data, enabling data centers are gobbling up. Pretty mild story there. We're still 5% higher year every year, but mild decline from the month, right? That fell in the month, right? Yeah. Which was weird.

Is that just measurement or hard? I mean, that's, to me, the energy prices, it's going on. 5.1% year-over-year growth is a pretty clear trend, whether or not that occurred in September and kind of the countervailing forces that we saw in broader energy markets. Food prices. So the one everyone's looking at their CPI for food at home, our proxy or the proxy for grocery store prices, 0.3% increase. That follows a 0.6% rise in August that lifted the year-over-year rate at 2.7%. again, this is another predictable change.

We have PPI data, which we're not getting for October. It was only the CPI that was mandated to come out. I'm sorry for September. But what we saw in summer was a pretty sharp rise, clearly sharp rise in food products, mostly stuff that's being imported or is very vulnerable to tariffs. It's just a matter of time before those wholesale prices make their way on at the grocery store shelves for U.S. household. So a pretty predictable rise there. Food away from home doesn't get as much attention, mild on the month, 0.1%.

That leaves us with core CPI, again, right where we expected it, 0.2, 0.23% increase from August to September. How he does that, he goes to, he's going to the second significant digit now, you know, on a regular basis. I only do that when when I'm within like, yeah, our forecast is in like three basis points. The relatively mild, that's downshipped from the, for the month before. I should say the third significant digit, right? It's not the second. I don't have enough to tough. You got corrected about that. I always get corrected on that.

Sorry, Matt. So the 12-month rate there, core CPI also 3% now, but that actually lowered from 3.1% in August to now 3%. As a reminder, the Fed targets the PCE inflation. 2% is their stable, low-and-stable price mandate, and that's typically corresponding with 2.5% roughly. You say that. Isn't it more like 2 and a quarter percent?

I mean, it's not a 50 basis point, half point gap between the CPI and the PCE typically. With not a ton of confidence on the time horizon there. I think the longer view, the wedge is generally half a percentage point. But if you think it's a little bit more narrow on that, is it well? I call it 0.3. Okay. Political answer. And it does, yeah, I mean, it does vary some.

But yeah, I think. But it is a good reminder that. CPI is a little bit higher. So, you know, we're not, the Fed's not targeting 2% CPI. Yeah. Yeah. I appreciate your grace, Claudia. Excuse me.

General, from the core CPI story, I think the most important thing is if you just look at the past three months, so the annualized three month moving average, if that were to occur for basically what we're estimating is if we saw the past three months over the course of a year, what would core CPI look like? 3.6% inflation, even taking a six months. month moving average. So again, it's a stable, sturdy measure that you can kind of ignore a lot of and you get rid of a lot of the noise. Three percent is the six month moving annualized average for core CPI. So still too high, needing to come down, moving in the wrong direction. That's up from

2.7 percent in the month before. That's the high level overview. I think tariffs. I know you construct a kind of CPI index that is of tariff of goods that are impacted by the tariffs. So what did that look like? So our tariff sensitive CPI that we construct, 0.37%. So higher than core inflation, higher than headline CPI. So it's an upward pressure.

And tariffs, that's how you get to a conclusion, you know, from a narrative sense of tariffs are driving inflation higher because if you just look at those components together, weighing them by how much they matter to household budgets, those prices are rising more quickly. And the three-month moving average there is closer to 5%.

So those price increases. And I would generally characterize September, September's report as not as for those tariff sensitive components, not as hot as August, which we saw pretty sharp rises and things like apparel, jewelry, tools. A lot of those, the inputs that get hardware and tools that are making it to the big box retailers. Those prices were really hot, not as hot in September, but after a couple months of strong growth, you'd expect to see maybe a correction.

Instead, we're just seeing milder, but still positive growth and inflation. So you're starting to see the year-over-year rates pile up. And again, those pass-through, the pass-through effect of those tariffs are pushing up broader measures of inflation. Okay. So my kind of 30,000-foot level interpretation is inflation, CPI inflation, consumer price inflation is basically 3% headed north here. The tariffs are bleeding through. So we're, we're, the inflation's above, meaningfully above the federal reserves inflation target. We can debate what that is on the CPI, but it's meaningfully above. And the direction of travel is it's not the way you want it to go here. It's headed north.

Is that kind of roughly your take on it? Yeah, that's how I would take it. And if I were to be a little bit more nuanced, I think you got a few one-off components that really kept poor CPI lower this month than it might otherwise be. So shelter inflation was unusually weak. And we focused hard on shelter inflation, especially through 2023, 2024. That was the holdup for the broader distance.

inflationary process, pretty sturdy growth in August and then a real downshift in September, no reason to expect if we get October CPI report that that's the new normal. It's a slow-moving component there and we kind of expect a regression to the means. So without that, you know, shelter is a huge weight within the CPI. If you just had normal growth, you're closer to 0.3 percent, probably on the on the higher side of 0.3 percent with normal shelter inflation, normal being what we've seen the past year. And use vehicle prices. Is another one. I like the word, Matt, just me. I like the word typical, not normal.

What's normal? Yeah. What's normal? That's deep. Chris normal? Chris normal? I don't know. You know, so.

Yeah. That's a good point. Typical. It's all relative. Yeah. I'll try to work that in. It doesn't feel native to me. By the way, remind me, I got a good, new word.

At some point, yeah, a good new word. Yeah. They're always controversial when you debut a new word. I know. I know. It is from a listener who came up and we were chatting. Is there going to be a more appropriate time than now? It doesn't feel right to me.

I don't know what the word is, I guess. You're going to have to use it organically. You've got to use it organically, yeah. So, Matt, any other outliers that push the number up or down? Just quickly use vehicle prices. 0.4% decline. Of course, used vehicles aren't getting tariffs, but new vehicles are. new vehicle prices go up. These prices tend to go in the same direction. If demand for, you know,

if new vehicles become too expensive because of tariffs, people start the shift to the use vehicle market. So that's not a trend we expect to continue. Again, if you just saw typical growth and use vehicle prices, given the past two or three months, two or three months, again, you're looking at probably 0.3% core CPI growth. So not a trend to expect to continue. And something I would flag is odd this month. Got it. Hey, Claudia, you heard all that. What do you think? What are, perspective on the inflation here. Yeah, no, that's very much, I think, the read I had of today's data. You know, the, what we're seeing with the core goods and the potential tariff pass-through,

I think that's one where, I mean, feeling pretty comfortable with the idea that these are likely to be one time, not all at once, but one-time pass-throughs to the level of prices. I mean, I just don't think we have the demand environment to really see the spirals up in the, you know, the feedback loops getting persistent inflation from the tariffs. But these effects have come slowly, gradually. I mean, the core goods inflation is probably going to be elevated well into, you know, past the first half of next year. So, I mean, we're going to keep seeing CPI, especially year over year,

that are closer to three than they are to two, right? And so, but I think there's a comfort level of like, if you can isolate that as related to tariffs and that process, will work its way through that that's not the concern. So I spend a lot of time looking at the core services part of CPI because we came into this year with core services being sticky. And I think the good news story that we've had now for several months is what we see in the shelter components, owners equivalent rent, the rent of primary residence.

You know, it can be month to month kind of bumpy. And as Matt said, last month there was a little bit of heat in the shelter components that look like it was probably, you know, noise measurement air type stuff that was, you know, we got a payback for it this month in terms of smoothing that out. But the trajectory in the shelter inflation is good. I mean, it's, you know, we are, that's a slow moving object. It's very backward looking. So it doesn't tell us a lot about like the current demand environment. I will say some of the private rent measures are looking pretty, pretty optimistic in terms of being soft, right? So we could see next year shelter disinflation even undershoot pre-pandemic pace.

I think that's not as clear yet. And in the CPI, it'll take a long time for it to show through. But that's a good piece. But looking at the core services outside of shelter, that's still really sticky. And again, this, you know, the so-called super core, as the Fed named it. I mean, it was a firm number again. And so we really haven't seen, like, whereas in shelter, you can over many months see real progress towards, you know, a 2% consistent pace. It's not there yet in the super core. I think that was also a place I was looking. Again, we talked about how the CPI is like it for the government statistics this month.

And one place, while the link is tenuous, but these. core services outside of shelter, there's a lot more of the wage component in them. And like if the labor market were really deteriorating, if consumer demand were deteriorating, like, that's a place where you might, like, if that number, if Supercore had been really soft, I would have been more worried about like, oh, something may, we may be really having some weakness showing up in like the broader economy. Because again, we don't get the employment number Claudia? Pardon me?

Couldn't that just be immigration? I mean, you're, because if you look at personal services, that's kind of where I might go to for, you know, where the immigration effects might be most significant. It seems very sticky to me. So maybe it's a supply side, not a demand side thing. Yeah, yeah, yeah. No, and I think that's true. And it absolutely, I mean, this is definitely a theme in lots of piece of the account,

trying to pull the supply versus the demand out of it. But it's like if I were, if I were going to see some real weakening of demand and like happening right now like those core services ex-shelter could be where they'd show up now they may be they may be there right now and swamped by supply pushback from immigration right so we don't get to you know see all the pieces but i think when i look at the cpi for today it's like the fed was really on track to do another 25 basis points of cuts next week i think this will bring on any any of the hawks. I think they'll have a solid consensus to cut. But I also don't think Stephen Myron is going to get any more friends in the camp of dissenting for a bigger cut. Like,

I don't look at these data or any of the other data because we have a lot of, well, not the government statistics. There have been a lot of pieces of data. I don't, I don't see the case for the 50 basis point. Merrin just sort of the list. Maron being the former Stephen Myron. Yeah. Right. The newest member on the board of governors who at the last Federal Reserve meeting, he dissented, but dissented in favor of a larger cut. And his signals, he thinks the Fed should be not just gradually easing, but easing more dramatically. And I mean, I think Myron makes his case. Like, I think, you know, grounds it in his ideas about where, you know, interest rates and inflation are

headed. He's much more in the, we're going to see a lot more housing or shelter disinflation. So, I mean, there's a, you know, he has. his story. I just don't think the CPI data, the data that we've gotten so far are going to win other FOMC members over to the we need bigger cuts. I hope it's just because, you know, that that's like the right thing. The Fed kind of going, the gradual, let's do 25, let's keep going. I think they'll probably keep going in December. But again, I'm just unsettled, not seeing more of the data. Because, you know, if things are starting to unravel, they should be doing bigger cuts. Hey, Chris, I know you look at the core services X shelter, too.

What was your interpretation of that in the data? Yeah, right. Perfectly aligned with Claudia's views there, right? It remains persistent. It remains sticky, right? So that's whatever the reason that certainly, if you're thinking ahead in terms of that policy, that certainly could prevent some or delay some of the potential cuts coming forward if inflation sticks around. We can kind of look through the tariff sensitive piece if you want.

Lots of controversy around that, but you could make a plausible argument that that's a one-time shift, but the services piece should be immune from that. We're seeing that persistence there. Right. And of course, the other data we got today was on claims, unemployment insurance claims, both initial continuing. We collect that from the state labor department say. And Marissa, So what did that data show us? That's right. So we're not getting the weekly releases from the DOL centrally. We're getting them from the states and we can aggregate up the states.

And that showed the claims rose to 230,000 last week. That's up from 220,000 in the prior week. So they're still low. And they've been bouncing around in this range for a long time, right? This isn't concerning. We see them go up and down every week. Things that are notable that Matt, you pointed out, was if you look at it by state, the Washington, D.C. area, so D.C. itself, and then Maryland and Virginia had very large

increases in claims, if you look back over the year, obviously because of federal layoffs and furloughs, and these workers are now able to apply for some forms of U.I. And then, of course, the doge cuts earlier in the year. and continuing claims up to 1.94 million. That's, again, up over where they were in the prior week. This is from two weeks ago. And that's up pretty significantly over the prior year. And again, if you look at kind of the greater D.C. region, D.C., Maryland, Virginia,

that's up almost 50% from where they were a year ago. So, again, the aggregate looks great. You know, the aggregate looks fine, right? But when you delve into what some of these states look like, you can really see the effects of where there are layoffs. It's the federal government that's showing up in the claims data. Right, right. I guess the rule of thumb is we're kind of around 230-ish per month.

That's no big deal. That's kind of where you'd want to see it. 250, 250,000 initial claims then maybe it gets on the radar screen as, oh, this might be a bit of an issue. 275 yellow flares go off. 300. It feels like that's recession, you know, at that point. Kind of something like that. Claudia, any other perspective on that data, the UI claims data?

I mean, I guess it's consistent with your previous point about the idea that the Fed might cut, but they're not going to cut aggressively because, you know, you got inflation that's sticky and high, and you've got the labor market, which isn't great, but there's no layoff. So no reason to panic and start cutting. Is that about right? Yeah, and the claims data are very consistent with the low-hire, low-fire environment. You know, that we're still, that's moving long. And that's not necessarily a bad labor market.

It's maybe a fragile, potentially risky one. I think it's the risks that are, the downside risks that are motivating the Fed to pull some of the restriction out to lower the interest rate. So, yeah, I think the claims are consistent with that story. Hey, and that brings up the government shutdown. Here we are. I guess this is day 22 or 23, I think, something like that. 24. It's October 24th today.

October 1st, right? I used to look at the calendar. How big a deal is this so far? And what do you think? Is this something that's going to become a real problem for the economy? So in terms of problem for the economy as a whole, it's likely to be narrow in that the, you know, one of the big, and it's showing up in the local economies, you know, DC Metro has a high concentration of federal workers. Of course, federal workers are all across the country, but I mean, they're not getting their

paychecks. And today was, you know, for federal workers, this was, you know, missing their first full paycheck. So the last paycheck, they got half of it because half was in the prior month. So, I mean, that's a real issue for workers. Now, the administration is trying to take off some of the pressure points, the leverage points, probably by finding ways to pay certain parts of the federal workforce, like the military, potentially federal law enforcement. But that's not all federal workers, right?

And even the ones who are going to work this whole time are not getting paid. But the reason you think of that as being kind of limited macroeconomic effects is typically that pay, they're going to get the back pay, whether they were working or not. I mean, there's been threats from the White House. Maybe this time will be different. But in all likelihood, that's what's happening. So you may see a hit to GDP in the fourth quarter. A lot of that kind of is mechanically because you're just not,

the hours aren't happening in the federal workforce. But then when, you know, the government reopens and you get back and you get the back pay and things even out and we ought to see a little bit of a boost to GDP that, you know, evens it out. So it's like the macroeconomic effects typically have not been very large. Now this time could be different in that there have been some layoffs during the shutdown. So these would be like permanent. But it's been pretty limited and the legality of it has been questioned,

as with many things that have been happening coming out of D.C. But so I think we're still in the place where the economics of this probably aren't that big. One thing that was striking to me is that we got another read from the Michigan survey for the month of October. And like this is the federal government shutdown is just not registering with people. They said 2% of respondents in their survey. spontaneously mentioned the shutdown at all. Because they asked about, like, what economic news have you heard? Or, like, you know, and they said, it's, it's quite a bit less even from the last shutdown in 2019.

I mean, this is just not registering. And I think the unfortunate piece is there's no end in sight right now to the shutdown. And the way this could come back in, this would be different and bite the economy is, you know, we've talked about the disruption of the economic data, right? And we are, I mean, we're at the point now where there probably will not be in October CPI because data collection is not going to happen for the entire month of October. And you can't send the CPI data collectors back in time to go visit stores in October that is already over. Right.

So it's one that, I mean, that one just probably we're not going to have it, you know, in terms of, they get some private data, but it's going to be very low in terms of quality. And it's going to be this hodgepodge of we'll get like, we can probably piece together in October. establishment survey because, you know, they often ask businesses back in time, you know, like how many jobs were created. That October unemployment rate, we may not have that because the household survey, you know, the recall bias and things like that. So because again, we're at this moment where potentially things could be turning in the economy. We don't have signs of it yet. Like it looks like things are just kind of muddling along. But if we were in a period where there's just less

visibility, a lot more uncertainty about how to read the data. And if we miss the signs, because a lot of times once the labor market, we all know this once, it starts to unravel, it can really pick up steam. And policymakers like the Fed, they're going to have the most beneficial effect if they can get going quickly. And we may not. And so that's where the shutdown could end up coming back to cause bigger economic problems. If it slows policymakers down or business makers down because they're just, you know, missing the signs of a shift. I mean, it stands to reason that something's got to break somewhere at some point that's going to really have macroeconomic consequence.

Hard to know. I mean, air traffic controls kind of the poster child for that. Yeah, no, the Thanksgiving travel is probably the next big pressure point, like kind of general discontent with the shutdown and also the health care premiums, like the, like the, Those are getting set November. So there are points along the way. And with things in D.C., like, there can be no end in sight. And if the president woke up tomorrow and said, I want to make this over, it'd be over in a few days.

So things when they start to move could change pretty fast. But yeah, it's just, it feels like they're managing out some of the pain, like by paying the military and doing things. So this really could drag on for a while. And it probably shouldn't have big economic effects, but it's not. this is unusual to have a full government shutdown even this long. And it's getting, well, for a full one, this is the record. This is not a record, I think. Yeah, I think the longest partial was 35 days.

That was in 2019. But that wasn't everything. Yeah. Chris, what do you think about? I mean, it just feels weird to say, oh, the government can stay, federal government can stay shut down and nothing start breaking. That just doesn't, I mean, I don't know, it doesn't feel intuitive to me. What do you think?

Yeah, yeah, I think you'll continue to see, right? There's the macroeconomic effects. And I, again, agree with Claudia, in terms of the timing impacts, perhaps, right? We have some slowing here, but then as people get paid in the future, they'll kind of catch up to some extent. But you're going to start to see more and more cracks in certain areas. And I always, my favorite is always to come back to housing, right? and the national flood insurance program, right? If you're not able to get flood insurance,

it prevents people transacting homes. And yeah, it's not national in scope. But it does affect certain communities and certain transactions. Those do have some spillover effects that kind of start to build on themselves. So I think we'll start to see more and more of those kind of cracks in the pavement, if you will, the longer this goes on.

And I think more and more members of the public will be upset by those. they're not really thinking about those ways that the government impacts them very directly. But as time goes on, more of those things will be revealed. And so we'll have more of a corrosive effect. Well, we're going to have a webinar. I'm going to record it next week with two of our other colleagues, Brendan Lacerda and Justin Begley. They've done a lot of research. And they're running different kinds of scenarios, you know, depending on the length and disruption, that kind of thing.

That'll be released mid-late next. week for folks, and I think people will find that interesting. Claudia, so I got you on and we kind of went right into the weeds. I mean, we went right down deep into the balance of the data. Let's take a big step back. And let me ask kind of broadly, how are you feeling about the economy? You kind of alluded to it already, muddling through that kind of thing. But how are you generally feeling about things at this point?

about the economy's performance broadly? In terms of, yeah, it's kind of a mixed bag. Like I, so I'm not, my base case is not a recession. So I don't, I don't see the cyclical deterioration, but I do see a trend slowing, right? And so I think like in terms of trying to get a read on the labor market, And we already mentioned kind of there's a lot of cross currents of demand and supply. And I think absolutely in the labor market, that's a big piece of it. And so when I see the big slowdown and job creation that we've seen this year,

and frankly, from some of the preliminary estimates of the benchmark revision, it looks like that slowdown and payrolls probably got going last year as well. Like we've probably been in this low, higher, low fire environment. It's been with us now for some time. Like this is not a new arrival. And to me, I do think the, like the, like the. greatly slower immigration. We've got baby boomers at peak retirement. I think they're structurally in the labor market, an explanation for a lot of the slowing. There is demand slowing and unemployment

rate has been moving up, you know, edging up a couple of tents this year. But to me, this looks like I think we could we could push through in this kind of low hire, low fire environment. I think it's a risky one. Because I don't see the big negative event. Like right now, we don't have as resilient of an economy because we're much more concentrated. That's true in the labor market. That's also true in the activity space. Where the growth is is much more concentrated than it was even a few years ago.

So if you had a negative event, like say the whole narrative about AI really turned on its head and we had a correction in the market or the U.S.-China trade really blew up and we had a big, you know, some big issues or just if you think about like, it'll inevitably be something that we haven't even thought about. That's usually what those bad negative shocks are. Like if something like that were to happen, then I think we are in a like cyclical deterioration of the labor market. Because we just don't have the padding that we had, say, back in 2022,

feds, you know, raising interest rates aggressively. And the labor market could buffer it, right? Like that's just not where we are now. But again, I don't see that, like I'm missing that negative event. to go into kind of more of a negative outlook, but it's risky. So I'm like fully on board with the Fed reacting to the downside risk to the labor market, because I think they are real and outweigh the sticky risk to inflation. Inflation getting stuck at 3%. I think it's a real risk, but I think right now it's outweighed by the labor market. But I am, I feel like we're going to get through

this year. I think there are some lifting of some of the uncertainty. We're getting a little more more clarity in the policy space. We're not going to get something that looks, we're going to deal with more uncertainty in the policy space through the end of this administration. I mean, but I think we're getting to a place where you could have businesses who are willing to get back into expanding and growing. And there are some, you know, some of the tax breaks, some of the investment. I see next year being a better growth outlook, better employment outlook. I think that, and this kind of came up a little earlier in the CPI, I think that'll pivot back to some of the focus on, hey, that inflation.

is still sticky. So I, you know, I think we're going to get some good news going forward on the labor market, but that's, but we're still going to be like, oh, there's still this inflation. But you're dealing with something that's like 3% inflation, not 5% inflation. So I think it's a little bit of a muddle through is my outlook. But I think, you know, frankly, as hard as it is to read with the moving pieces, I'm getting a lot more comfortable with like spinning together risks scenarios. like it's important to have a baseline, but I think in a moment like this where there is so much uncertainty,

like having, like what does the recession look like? What does the like, oh, quick disinflation look? And then just be kind of watching for the signs of it. So I guess I don't have high conviction with my baseline,

but I think it's more of a muddle through. But I listen to people who are more concerned and pessimistic, as you often, like I think your concerns about the labor market seem entirely valid to me, even if they're not my base.

case. Well, actually, I, everything you said, I'm very sympathetic to. I mean, maybe I dwell on the downside because that's kind of, I think, prudent to do in the current context. But, you know, my baseline doesn't feel like it's very much different. It sounds, you know, my interpretation what you're saying is, look, from a cyclical perspective, it doesn't feel like there's a moral threat here, at least not at the moment. One could, one could materialize, and we should consider those, but barring that, you know, that doesn't feel like we're going to go into recession. But it does feel like there's this weight on kind of the trend or underlying growth rates in the economy. You can obviously see that in the labor market because of policy.

And that's a weight on the economy that is making it difficult to kind of kick into higher gear. Now, maybe next year some of the policy uncertainty fades and we get a little bit of fiscal stimulus and the Fed's easing and monetary policies, you know, taking, taking the foot off the break, we start to see, you know, some stronger growth. But it's kind of a, as you say, muddle through kind of outlook, not a recession, but, you know, nothing great. Did I get that roughly right? Yeah, I think that's true. And I would say, you know, whereas I'm not as concerned about the cycle, like the recession. I am, I think there's on the trend,

I have some real concern, particularly with immigration policy. I mean, because you could have some pretty pernicious effects that are drawn out in terms of like slower trend growth. And some of the changes in immigration policy, like with the H-1B visas and just being less welcoming to immigrant students or workers.

These could end up having some big productivity effects going for in terms of technology. So I worry about some of the sand that's getting poured in the gears of the U.S. economy that aren't like we fall off a cliff, but we pay for this over a long period of time in terms of slower trends. Totally agree. And even there, it's hard to disentangle the cross currents, right? Because you just talked about the headwinds, mostly on what's going on with the, immigration and what that means for labor supply and productivity. But then on the other, the tailwind is the AI boom, right?

Which you kind of count as a potential risk. And we can come back and talk about that, given the high valuations, the equity market. But that's a, could be a secular trend tailwind to productivity growth, right? So it's hard to disentangle. Even that it's hard to disentangle. Right. It may be a headwin to labor. Yeah.

I mean, well, transformative technology would be transformative. We would see a lot of moving pieces. Right, right. Anyway, why don't we do this? Why don't we play the game, the stats game, and then come back and talk a little bit about some of the risks. You know, we want to talk a little, I know you want to talk a little bit about income distribution, wealth distribution.

Maybe we can talk a little bit about what's going on in the equity market because you are now the chief economist of an investment advisor and it'll be really kind of cool to listen to, you know, your perspectives on that, any other risks that you have, and then we'll call it a podcast. Does that sound okay? Sounds like a good game point? Okay, good. So the stats game, we each put forward to stat.

The rest of the group tries to figure it out with clues, deductive reasoning, and hints. And the best stat is one that's not so easy. We get it right away, and one that's not so hard. We never get it. If it's apropos to the topic at hand, I'm not sure what that is, but, you know, well, whatever that is, all the better. And we, Claudia, just to give you a sense of things, we're going to go with Marissa. That's been tradition. So Marissa goes first.

Marissa? Okay. All right. My stat is 5.5%. Inflation? Yes. It's an inflation statistic. Yeah.

It's in the CPI? Is it year over year? Yes. Tariff sensitive goods? It is a tariff sensitive good, which is why I picked it. Coffee? No. That was my other one.

That's like 19% year over year. Yeah, a lot more. It's not beef. Beef. Beef is more too, I think. No. Toys? Furniture, electronics. No, it's, I'll give you a hint.

I picked it because of a headline that came out last night regarding trade relations. Maple syrup. Something from Canada. Lumber. You're getting warmer, yeah. What do we get from Canada? Maple syrup. Maple syrup.

It's not maple syrup. It's not? Oh. But it's something we get from Canada. Yeah, it's made up heavily of a Canadian import. Something would. Right? Furniture? But it's not furniture?

It's not furniture? No. We give up, what is it? It's paper products, household paper products, like paper towels and tissues. So the majority of the big paper towel brands you would see in the grocery store Costco, home goods, Sams, those places, use Canadian soft pulp to make those paper products. So that 5.5% up over the year is big for this category. And the increases in the past couple months have been quite big. So just over the month, it was up 1%. And from August to September,

it was up, or sorry, July to August, it was up 1.2%. So there's been a, streak of hotness in prices in that category. I'll have to say that's not a problem in my household because when the pandemic hit, my wife stocked up on paper products. And I could, I should start selling the paper products. I could make, they're sitting in my basement in a dry area of the basement. And it's like, why did we get all this toilet paper? You know, what was going on?

Well, now you're happy that you did. Yeah. Because inflation is coming back. If anyone needs any paper products, I'm your man. Anyway, that was a good one. Thanks, Marissa. Claudia, you want to go next? Okay.

So mine is not in the CPI. So 1.9. One point nine. Labor market related? It's a labor. It's a labor market. Million? It's a ratio.

It's a rate. Yeah, it's a rate. It's a rate. 1.9. Is it like a hiring rate or close that's one of those quit rate? Quit rate. Yeah. Okay guys it's been a while since I've kind of come through for the group but I'll have to say I came through for although Claudia gave me a big hint right away she was very kind it's not in place. Yeah well I knew it was a little down the but I wanted to the reason I had highlight is I've been since you know all the new data has been like stopped. I've been looking a lot.

at kind of looking at the cycle as a whole, because we keep talking about how like the quits rate, and a lot of these rates are very low. Like we're in a very low turn. But it's pretty notable, like this recovery was a job full recovery. Like we had a lot of, I mean, like really high levels of turn early in the recovery. And so really if you look at kind of the last five and eight half years as a whole, the average quit rate has been well above what we had in the entire cycle after the Great Recession.

and it looks pretty similar to after 2001. It's just we've had this very disjointed, you know, so I think, you know, it's important to put, like, our latest numbers in the context of the cycle, and it's been a very unusual cycle in the labor markets. You know, the Fed talks about the curious balance right now in the labor market. We've had a lot of curiosities in the last five years in the labor market. So anyways, so that was my quits rate.

So you're saying since the pandemic, because we had such a high, quit rate coming out of the pandemic. You average that with now the very low quit rate on average. It's still pretty high quit rate compared to, I mean, the Great Recession was unusual, like, slow labor market. But it's like I've been doing a lot of comparing of like the current quit rate to the couple of years right before the pandemic. And it's like, oh, but if you look this cycle, like that, that was where the labor was finally picking up after the group, But that whole cycle, in particular the first five years after the Great Recession started, that was a very low quip, low churn. And again, if you look after 2001, this recovery, the whole five years looks pretty similar on average to that one.

It's just we've had, like, 2001 was much more steady. And this is like we had quits rates of 3% and now they're in time. You know, so it's just a different, like, I don't know, you know, I think these these things relate like businesses, you know, the labor force right now. is a reflection of what's been happening over the last five years. Yeah, that's a good one. That was a really good one. Let's do one more. Matt, you want to go?

Sure. 40%. Is this a share of something? Contribution to the CPI of something? No. That was too vague for me to say that. That'd be awesome. Is it inflation related?

Yeah, that's the best question. Inflation related. 40%. and it's not a price increase. No. Okay. It's some share of the CPI basket. No.

No. I'm surprised. Is it from the CPI? 40%. Yes. Yes. Oh, is it the share that's imputed? Yeah, yeah, yeah.

I got it. No, no, no, no. I got it. Chris, who got it? What, Claudia, who got it first? All right, but we're going to be very careful about what that number is, right? It's not the 40% of the CPI is imputed. Oh, oh, okay, then I got it wrong.

Right, because it's 40% of the imputations are using different cell imputations. Right, that's statistic. Of the stuff that's imputed. Of the stuff that's, it's like, what's the method of imputation? Like the BLS does not report out what's the percent imputed. I mean, which actually would be kind of a funky number in the CBI because like OER is all imputed. Right. Like the owner's equivalent rent.

But yeah, it's that for whatever reason they report out. And I actually had asked BLS like, is there a way I can actually back out the way it gets quoted, you know, what percent is imputed? But it is absolutely correct that what they're telling us is that the imputation method they're using is a less. good one. Hold it. Because if you had to fill in a blank number, you'd want something similar, and they're not doing that as much. They're using more dissimilar, like they're not in the same cells.

So it is telling the same story. It's just... I'm a little confused. So what's... So it's my thought, my kind of interpretation was before this, at the start of the year, roughly 10% of the prices for goods and services were not directly measured. they were in what I would use the word imputed and now it's 40% is that am I not thinking about that right is that wrong so the denominator for the if I'm thinking of the right chart where they've got

the same cell and the different cell imputations the denominator is the cells that need to be imputed so it's not all it's a subset it's the subset it's like once you know they do all the survey they get and then they've got missing value and they need to go do imputations for it these are missing value imputation, not the OER ones, right? But they don't, the BLS doesn't report how many imputations are you needing to do. They report, and again, it's like kind of an interesting why you're telling us this piece of information, which is one more step deep in the weeds, like what method are you using? When you need to do an imputation, are you able to do same cell, which means they're very similar items, or do you do different cell? Like it's a, you know,

in the same geographic area, but it's like, you know, instead of boy socks, it's girl's socks, or, you know, like, so they're just telling us, is it different cell imputation or same cell? But we, but we know in a lot of ways they're doing more, they're doing less data collection, right, 20% less of it. So like, there's all kinds of little bits and pieces, but that one has, you know, it's, it's about the imputation method. So anyway, sorry, I just like that one, I keep seeing, you go bump around. And it's like, you don't want to, it's like this struggle with, like getting the number, if it kind of gets the story across, why like get all wonked out? But you all are wonky people.

Yeah, no, no. And like it struck a chord. So, Matt, is that 40% for September? That's right. Yeah. Oh, because typically they don't release it with the report, right? It comes a couple hours after the report. I mean, this is, okay.

Yeah. Yeah, so that's very good context. I would, you know, I think it's like Claudia mentions, it still is. is still a trend. I mean, whatever this number was, it's a smaller. And I think the conclusion is a little bit more nuanced because you're talking about a subset of the larger CPI components in a way that I don't think I would have, I know I wasn't articulating it that way.

So that's interesting. But the trend from 10% now to 40% is just there's less observations. There's more. I also, you know, the context and the conversations I've had with the BLS is that the same, the difference is often geographic. So whether it's boys, girls, sucks. A lot of it is, hey, we don't have somebody in San Diego, but we're going to pick up, you know, that information from Las Vegas or something like that. And the more of that's being done, the wider, the potential standard error, potential forecast or estimate error can be.

So I think that's of the same type of critique of what's going on at the BLS. And I'm curious where that looks. I mean, I was very interested this month just because it was a truncated schedule for the enumerators to get out there and observe these prices. So it's not surprising that it's a little bit higher. But it remains very elevated as it has been in the past couple months. And curious if there is anything to look at in October because there was this rush-hurried schedule to get September's estimate put together. And as we mentioned, there's no time machine to go back and look and what would be the price observations from this month. So got it.

Very challenging over there. Yep. Yep. Hey, let's in the remaining 10 minutes or so that we have, talk about some. of the risks. And we talked about the government shutdown. It didn't feel like you felt like that was going to be, under most scenarios, that that was going to be the thing that really would do the economy in. What about, and you mentioned, but I'm really curious, and I kind of tease you a little bit about it, but what, how do you feel about valuations in the equity market? The

fact that AI stocks have taken off. And that does feel like it's driving a lot of spending among the well to do through wealth effects. And that's key to. economic growth. Are you concerned about a potential correction in the equity market? Is that something that's on your radar screen? Claudia? I think that's certainly on my radar screen, I think probably for many people, right? I mean, the valuation got no point. We've seen some real gains in the stock market. And as you said, they're feeding back into the economy. Both are the wealth effects with consumers, but the AI is having an important in the like the physical investment, you know, the data centers, the software. I don't subscribe to the like we would have still

had GDP growth in the first. Like I think, you know, you can slice and dice GDP data a lot of ways and I don't want to say like we're just, you know, we're all running on fumes if it weren't for AI. Like I don't think that's the case. But there are real, I mean, we're seeing the AI stories show up in economics. not just in financial markets, but it is helping be a boost in the real economy, too. And if that were to unwind, and you know, financial markets would start, like they're forward-looking. A lot of, well, absolutely the investments are being made, the physical investments are being made with a look to the future of what the demand will be for those investments and the way they'll be

able to be integrated. And that's where the valuations are, you know, they're looking into the future. And so it is a tricky place where, you know, it's a new technology. We're still figuring out how to use it. Adoption is not widespread. Like the revenues from the technology are not widespread. You can see them in the pocket. Then I get a lot of questions about, oh, what's AI doing the labor market?

I'm like, if you go into particular industries and, like, you can find effects if you look for them. But I think it's very, very hard to see it in the aggregates for the labor market. Like, I just don't think it's constant. But like the investments are with the idea that it's going to be. Right. And so I think if there were, if you had like kind of a crisis of confidence in, you know,

where the eye goes, you could have a pullback in, you know, the stock prices and the pullback in the investment. I think the trend is, I think there's something real there, you know, in terms of the AI.

But it's unlikely to be a linear path. Right. because that's typically with transformative technologies. Like you have, like it's pointed in the upward direction, but there'll be corrections along the way. So it's not like I think there's anything imminent in terms of a correction, but because there are concerns and, I mean, some, you know, kind of technical with the way these firms are, you know,

investing in each other. And like, there's just things that are watching. And, you know, with markets, because a lot of this is forward looking at its narrative, you can have, it can unwind pretty fast, right, in terms of just having even a correction. And so it's one to definitely keep an eye on, but I'm not like saying, oh, this is, you know, frothy or I think, you know, we're over the edge. But it certainly is a risk in terms of valuations, but a risk in terms of how integrated

it is in the real, like seeing those physical investments there, I think is important, and these wealth effects. A major correction in the equity market that has broader macroeconomic consequences. Certainly not in your baseline, but something to consider as a risk scenario. Yeah, and I think of that when I kind of map out a recession risk scenario, I kind of use like a 2001 recession as a kind of a rule of thumb for this. Because it's not like we're, you know, a highly levered household bit. Like we're not, this doesn't, but that is kind of, I remember.

I mean, that had some, that was the mildest recession that we've had in a very long time, you know, and it's still a couple percentage points on the unemployment. Well, even that one was a sidebar. I think if we hadn't had 9-11, it probably never would have been labeled a recession, right? Oh, but it was a little. Took it down a whole other notch. Okay. Okay, well, that's, that's, that's, that's one. What about, um, uh, lower middle income households and the stress they appear to be. under subprime auto has come to the fore here recently in the headlines, a few bankruptcies.

And this goes into the whole issue of income and wealth inequality and the distribution and so forth and so on. How big a deal is this, do you think, Claudia, as a risk? So I'm generally optimistic about, I think this risk is one that could potentially be easing as we go into the next year. in the, you know, interest rates have been quite elevated. I mean, I think honestly, the, you know, the rise in the delinquency rates we've seen across, you know, various different household loan products.

I mean, they're higher than they were, frankly, they fell in the pandemic recession. But, I mean, they're elevated. But, I mean, given the fact that, you know, interest rates are quite elevated relative to before the pandemic. I think they're in kind of a reasonable range. And on some measures, like they've leveled off, right? Like you just, you're not kind of in the clearly uptreending on all, all different kinds of delinquencies. And the thing is, is, you know, the Fed has, you know, restarted easing.

And I think they're, you know, continue to take some of, you know, as the interest rates come down and we've seen, you know, mortgage rates are moving down. And, you know, like, and credit card rates are tied pretty, pretty tightly to the federal funds rate because these are short term rates. I think that there's going to be some relief. leaf in that area. And, you know, we've, you know, the, the, the case-shaped economy gets a lot of discussion right now. But we, you know, it's often kind of think, there's a lot of discussion about kind of the wealth effects, kind of pushing up at the top. Maybe the labor market slowing has

been an issue at the bottom. I think I've to understand, too, like with the Fed, having these restrictive interest rates, those don't hit the economy uniformly, right? It is, I think part of what's driving the lower kind of middle being a little slower on the spending side is that's where some of those interest rates are hitting, right? That we've, that that's another channel that, you know, as that has been holding back the spending. And it's one that we, I mean, I think we are in an easing cycle from the Fed. I think it'd be a pretty gradual one. So I don't want to say, I think this is going to turn around. But in terms of definitely kind of leveling out those delinquency rates, think that I see some optimism for that going into into next year. Okay, so that's not going to

do a sin. Let me try you one try one more. What about private credit and kind of leverage in the non-financial corporate part of the economy? Is that on the radar screen, your radar screen? On the radar screen, it's probably not one that I have invested as much thinking into. Maybe we're not a big private credit shop. And so it's not as watching clearly. But I do think, you know, like in the credit markets, there's been a lot of attention recently from the, you know, the first brands, the tri-color, some of the real blowups and kind of trying to figure out,

like, you know, are these, what is as Jamie Diamond says, the cockroaches and how many more of these are there? And like, are the stresses? And I mean, I really spend some time trying to think about. Okay, what were the factors here? Are these really idiosyncratic? You have a CEO that was just, you know, stretched too thin and like, or was like, what are the forcing events? Like I did think it was kind of interesting doing some of the back reading on first brands that one of, you know, I mean, they had a long history of, I think, some probably real issues in terms of how they were doing their financing, the private credit. But they also had mentioned how like the tariffs had been an unexpected extra cost because they do a lot of automotive. of parts and goods like that. And so trying to think about are there, are there any of these kind of more systemic macro factors that might be pushing? Because sometimes you get into a lack of transparency or because you're kind of pushed into a corner. So it's kind of like, are these, because you want

to like, are these kind of the canaries in the coal mine? Are these just the bad apples that the market, you know, that are always out there. We have to kind of sort out. So I've been trying to pay, but it still feels more like it's the bad. add apples as opposed to, you know, we've got something systemic. But I, like, I don't want to say subprime is contained, right? Like, there's a real, you know, history of kind of writing that off. So I think that is worth continuing to kind of speech back in the day called subprime lending and said, hey, don't worry. I think that was. Yeah, that he says his subprime is contained. That's his one of the things. He probably regrets. That's what I was eluded.

to the member of the end. Yeah, I mean. Did you, Claudia? You didn't write that. No, no, no. I do not. I'd not get that credit. But it is, but you know, that's what's hard.

And that's what we're, I mean, we all try to do this. Well, he should have been listening to me. I'm just saying. No. Yeah, no. Yeah. So we're looking for this systemic, but I, I don't, I don't see it there. But, you know, any, any time where there's less transparency.

Yeah. Like that, that's where problems can really build behind the curtain. and if the due diligence isn't being done. And it's just, you know, so you're looking for those kind of frothy stories and the, oh, we don't need to check because this is just so good. Right. So I think there's reason to be concerned in that space. But again, like kind of thinking like that macro discussion, I was having like,

what's the negative event that pulls the economy down? You know, that's not one. I've been like kind of first order. Well, I'm going to just ask you one last. question, kind of an open-ended question, did we miss anything? Is there anything on your radar screen that I didn't bring up that you think we should be thinking about, or did we cover it, do you think? Yeah, no, I think we covered. We covered a lot of ground. I just want to make sure there's nothing, something that's really

bugging you out here. Yeah, no. You didn't want to tell us about, but okay. Okay, all right, very good. Well, I want to thank you so much for coming back on. I can't remember when the last time It was. It's been a while ago, but I'm really happy to be back. Yeah, so good to have you back. And look forward to having you back on in the future. So thanks so much. And, hey, Marissa, Chris, Matt, anything else before we call it a podcast?

No? I don't think so. I was taking your head. Okay. All right, guys. Okay, well, with that, dear listener, we're going to call it a podcast. Take care now and we'll talk to you next week.