Moody's Talks - Inside Economics - Consumer Prices, Consumer Credit, Client Concerns

Episode Date: October 17, 2025

Colleague Matt Colyar joins Cris and Mark on the podcast to discuss the prospects for inflation and the threat posed by subprime consumer credit problems to the banking system and broader economy. They discuss all of this through the prism of concerns raised by clients in their travels this past week: Mark was out West, Matt in Texas, and Cris in Bermuda. Guest: Matt Colyar - Assistan Director, Economist, 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 Zandi, the chief economist of Moody's Analytics, and I'm joined by my trusty co-host, Chris DeReedies. Hey, Chris. Hey, Mark, good to see you. How's your travels going? I've been busy, but all good. I was in Bermuda last week.

That's why I missed the podcast. But that was a great Moody's conference with the reinsurance industry. Ah, very cool. Why Bermuda? Apparently there are a lot of reinsurers. there. That's a very favorable tax and regulatory environment for them. So the whole industry, this industry has really developed and concentrated there. And yeah, you have all the major players, all the insurance companies are represented there. And it's an interesting place. It's small.

So right. So everybody knows each other and they kind of walk to each other's offices and wear the Bermuda shorts. So it's a different vibe. What did you learn? This is what? top of the list of things that you learned, what's number one? That Bermuda shorts are an acceptable business attire. They are? Yes. Yeah, people came to the conference, Bermuda shorts, no problem. Did you buy any?

Do you have Bermuda shorts? I did not. For some reason, I could envisage you in Bermuda shorts. Right, Matt. I should bring Matt in. Hey, Matt. Matt, call you're our colleague. Hey, Matt.

Hello, Mark. Hey, Chris. And yeah, I could see Chris in those shorts with a surfboard under his arm. It feels very native. Wait, what? Wow. Do they surf in Bermuda? Is that a surfing?

No surfing there. No surfing. I'm not even positive what Bermuda shorts are. I just assume they're very beach friendly, but the image of my mind is a surfing scene. Oh, they're more formal. They're more, uh, I think they're from the colonial era. That's my guess. Right.

Oh, I'm way off. Okay. Yeah. Right. Interesting. Have you ever owned a pair of Bermuda shorts, Chris? I've had longer shorts. I don't know that they were actually Bermuda shorts, though.

I think I actually had a pair back, you know, 55 years ago or something. I think at one point they were, do you remember Madras shirts, the Madras shirts, the kind of the Indian shirts, very, very sheer, and they would run if you, if you, if you watch them. Do you remember those? or were that before your time. No, I remember those. Yeah. I think they're, they come back in cycles, but, yeah.

I think they do. I think they do. Yeah, I haven't seen them recently, but they were all the rage at one point when I was in my 20s, I think. Bermuda shorts and Madras shirts. I don't think they go together, but, you know, kind of same era. I heard you're telling me that the Cayman Islands, though, is becoming a competitor to Bermuda for the reinsurers.

A little, but that's what they were saying. So there are some regular. All it comes down to taxes and regulations. Yeah, right. In some cases, it's more favorable to do business outside of the Cayman Islands. But Bermuda is still the dominant reinsurance center. But, yeah, there are some other spots that are developing. Hey, Matt, have you ever been to Bermuda or Cayman Islands?

Have you been there? I have not. But it sounds like a lovely trip. Maybe Moody's could coordinate that the next conference. If Cayman Islands is becoming more of a player, maybe that's the next conference. There you go. I'm all for it. I'm all for it.

You're going to battle Chris for that right. Good luck with that. That's good. He's going to have his mighty Bermuda shorts on him, you know? And I'll have to Google what that is. But, yeah. Do you know what I meant by Madras shirts? Is that like even in your consciousness?

I didn't Google. No, I don't know. But I should. I feel like. Hopefully I got that right. I think they're Madras shirts. Oh, yeah. I got it right.

Okay. Okay, good. And we're missing Marissa. that's good to have Matt here. And of course, Matt's all things inflation. And, you know, we're really digging the bottle of the barrel here in terms of data because the government shut down and all the statistical agencies. We're not getting any data. But the Bureau of Labor Statistics did say that it is going to publish the Consumer Price Index CPI for the month of September a week from now. Here we're talking October 17. So they're going to publish on October 24th. Do I have all that, right, Matt? What's the deal? What's going on here? Yeah, that is all accurate. So the September CPI, despite a government shutdown, is coming out given legally the government needs to adjust social security payments. And we need to have a final Q3 value that gets used to benchmark prices from one year to the next by November 1st.

There is a legal obligation to produce this data. So we are getting it. It's only about a 10-day delay, which better than what we're saying to the labor market because there's no such obligation for a jobs report to come out during a shutdown, say. So, yeah, we're next Friday, the 24th. We should get September's CPI printed. Do you think there's going to be even more problems with the quality of the data? I mean, I know the CPI, the problem we've been experiencing is that because of budget cuts and staffing cuts,

that BLS has not been able to send out as many folks to Canvas for prices for different goods and services. And so an increasing proportion of the goods and services in this survey are being imputed. They're being made up with other data. They're not coming from any kind of survey-based information. And I think, correct me if I'm wrong, Matt, but I think over a third of the components of the CPI are now imputed up from like one-tenth at the start of the year. Is that right? exactly. And I don't have a strong inclination that we should expect that to go to 40 or 50% because of the shutdown. It seems like the enumerators, the statisticians that take care of the BLS should be back. And that's the personnel that's led to a 33-ish percent imputation rate.

The interesting part is that there's been an approval to hire more of the people that would be going out and observing prices. That's very recent. We can't, the expectation is not that that's going to occur during a government shutdown or during this kind of off-schedule release for September CPI. So hopefully that problem is addressed in the intermediate term, but no real reason to expect any difference from trend in September. And I guess we'll know that. The BLS will tell us what percent of the goods and services are.

The prices are actually imputed. I think they'll tell us that. Hopefully they'll tell us that. Recently, it's been within 24 hours of the data being out or even later that afternoon that we see that imputation rate. So expectation, I think it's reasonable to assume that's going to be the case next week. Okay, got it. Okay, so I know you've constructed an estimate for what you think the CPI number will be for the month of September.

What's that estimate? So we're at 0.3 percent. That's from August to September. That's about where consensus is. So other forecasters doing the same things or looking at the same price indicators, whether it's previous months trends or financial market movements, commodity prices. Our model digests all those relevant variables and we come up with an estimate. So we're at 0.3%.

That would lift the year-over-year change in the headline CPI from 2.9% to 3%. So drifting away a little bit higher and higher each month from the Fed's target. Pretty strong growth in our model in food prices, which is downstream of what we've seen in producer prices. So stands the reason, the costs, the transactions that we're seeing from business to business, wholesalers. We see a strong price acceleration there. We're going to see it on the shelves eventually. And that's, you know, we're starting to hit that lag where we're assuming food prices

rise. So that's one big factor behind the solid growth of 0.34% where we're at. And energy prices are another positive contributor. So we've seen some declines in energy markets. But over the, you know, in October, especially West Texas, Intermediated. is probably below $60 per barrel, but in general, energy prices throughout late summer started to rise a bit. Of course, electricity prices too, right? Which is a big story there.

I failed to mention, I've been traveling a lot too. I'm here in Salt Lake City and I love Salt Lake City. I love Utah. I love the people of Utah. There are folks in the state government are right at the top of our family tree. They were the first state client, government client of regional financial assistance, which was the precursor of economy dot com, which is the precursor of Moody's analytics,

the precursor to Moody's. And there's many of the folks that we work with 30 years ago are still here. And they're just great. The hospitality is just fantastic. And Utah is so beautiful. I know you can't see out my back window, but there's mountains back there with snow on them now.

So it was very, very beautiful. But anyway, why did I say that? Oh, because here in Utah, there's growing concerns about the cost of electricity, right? Because of all these data centers that's sucking up a lot of the electricity and driving up prices. And that I think is starting to show up in the CPI, isn't it, Matt? Yeah, so much energy. And there's certainly regional effects there where it's much more pronounced. But it's broad enough now as a national story that the energy required for the data centers that are enabling AI are sucking up so much energy.

costs are starting to rise and we see that through electricity prices just because of the competition there. So that's been a pretty stable story of the past few months. And certainly one, given the everyday new announcement of another data center somewhere, mostly North Virginia, but somewhere in the country, a trend we can expect to continue for the foreseeable future as long as this build out persists. Any other kind of, because I know you must be limited in the data that you have to be able to make this estimate of the CPI.

But is there any other data that's coming in from other sources that is helpful in guiding you here in terms of your estimate? Well, we can look at airline tickets, for instance, and there's third-party things that are all components of a larger measure. I should say that food and energy are pretty reliable ones that we have. And the strong growth there gives us a pretty good deal of confidence that headline inflation is going to be stronger than core inflation. So core CPI, we assume rise is 0.2%. So a little bit softer just because we're excluding. food and energy. Within core CPI, I think the most interesting component that we're looking at, that we're informing our forecast is coming from the vehicle market. So prices for cars are rising.

It's not been dramatic. And given how globalized supply chains are in the automotive industry, it's one of the components that we look at closely in light of tariffs. And we see other components that are very import intensive, like furniture tools. Prices have really risen over the past five months and kind of unambiguously. New vehicles that's been a bit lagged. It's a much different market, much more scrutinized public market. Companies, earnings calls are the big players that everybody's focused on and there's different dynamics at play there. But our expectation is that we're going to start to see in the fourth quarter of September into the next three months, a real acceleration of prices there, given the new year models being rolled out. It's a great time to

embed price hikes for these manufacturers. So that's when we're watching closely. And And the third party data we use from Cox Automotive is consistent with that for September. So what's your estimate for core CPI? So the CPI excluding food and energy prices. 0.22% increase from August to September, which would lower the year-over-year rate from 3.1% in August to 3% in September. It's just a 12-month comparison. So 3% on the CPI and the core CPI, that's a bit elevated. It's about a half a point, I would say, above what the Fed.

would be targeting, right? Because the CPI is about a half point higher than the consumer expenditure deflator, the PCE deflator, which is the 2% what they base the 2% target on. So if we're at three, that's about a half point, 50 basis points higher than the, I guess, what you would consider to be target or comfortable. Is that fair? Yeah, I think that's a good framework for thinking about it. And you think the direction of travel here, at least in the next three, six, nine months is for it to continue to accelerate because of the tariffs and immigration? Yeah, I think absolutely. Immigration probably gets underappreciated in a lot of ways in terms of how much that labor

market tightness is going to flow through to service prices. But because the story from tariffs to good inflation is much more direct and easier to digest, yeah, but both of those things are pointing to an acceleration. We don't need much stronger growth in headlining core inflation month to month. And what we're getting over the course of 12 months to get to our forecast of 3.8, 3.9 percent year-over-year inflation, which is where our baseline is. And I think recent data has been consistent with that. Oh, interesting. I kind of lost track. So our baseline forecast for the consumer price index year-over-year peaks out somewhere between three and a half and four percent out in

kind of spring summer of 2026? Yeah, I would go towards the upper bound of that range. The upper-bound of that range. Okay. Closer to four. Yeah, that's, I mean, if I'm in front of, speaking with clients or anything, hey, we're generally, you take all the interesting or important inflation measures. We're all about 3% now. We think we're going to touch 4% or just underneath 4% is how I kind of think about it. Well, one of the questions I've been getting from folks here in Salt Lake is why hasn't the pickup in inflation been quicker? It just feels like it's delayed. Compared to what economists have been, you and I and everyone else in the economics profession have been talking about. Is that just perception? Is inflation sticking to script here? Or is it the pass

through from tariffs and immigration into inflation slower than you would have expected? I would say it's been a little bit slower than expected. And there's the initial offsetting factors of the inventory build and kind of the finger crossing of other companies thinking that these tariffs are not going to be here in a year. So let's not, you know, risk market share and, and, and hike prices prematurely. Let's kind of wait this out. I think so the former inventory building, inventory hoarding,

that dwindles every day if it's not already no longer tenable for most companies. And it was never tenable for companies importing fruit. But for the companies that could, they did. And that is now much less of a dynamic. The latter, I think, is interesting, especially I've stayed focused on Japanese price indexes. It's very interesting what the auto manufacturers there are doing. And then speaking with our analysts there. There's a trade deal announced between the U.S. and Japan.

It's 15%. A lot of terms that are relatively vague, but in general, there was a kind of clarity provided in summer. And my expectation was, okay, 15%, that's what South Korean auto manufacturers are getting. That's what Japanese, EU, car companies are getting. Let's just, it's just a matter of time before that 15% flows in through to consumer prices. But you talk to analysts, the analyst that I've spoken with, and you see kind of a slower reaction there, it still feels unresolved, is the point of view.

that a lot of Japanese manufacturers have is, yes, there's these trade agreements reached, but are we sure they're going to be here? Are we sure there's not more exemptions coming? So it's been slower for that reason. So I still think that there is a reluctance to raise prices, which has slowed the pass-through effect. And that's all to say that we still are seeing a pass-through effect. So to the extent that it's not been as dramatic as people and economists have expected, I don't think that's a huge issue. There's a huge difference there. I think we're trending as we would have expected, relatively predictably. whether we're a month or two behind, I think it's just a matter of, you know, expectations.

And I think we're very clearly headed where we expected to head six months. Okay. So we're basically on track here. Maybe a delay a month or two, but for good reasons. Yeah. These are huge decisions companies are making. So I think there's just a lag and it's not overnight. And I guess, you know, if I were a large company, I'd not want to get into the limelight here, right, given the political dynamics.

I mean, those are people, CEOs called out by name and by company to not raise prices. I think that's a real break on wanting to be the first company to hike prices publicly. I think that is a dynamic that's relatively novel in our current situation, but it is having effect on some of the maybe normal pricing behavior that you would expect, get on cost increases. Hey, Chris, let me bring you in. What do you think about all this? I mean, you must be getting the same question I am about why isn't, why doesn't it feel like it's showing up in the tariffs showing up in immigration policy, showing up in

inflation more quickly. Are you getting the same question? Absolutely. And I think I think the answers are right spot on what Matt provided here. It does seem to be a little bit more weight, I would argue, being placed on that last reason, some of the potential political backlash. So firms kind of holding back to some extent or dribbling out the price increases over a longer period of time, if they can, just because they don't want to be in that limelight. Got it, got it. And are you on board with our baseline forecast of CPI inflation going to somewhere between three and after four, closer to four, according to Matt, on a year of your basis through next late spring, summer?

Does that feel right to you? It does, barring recession. Yeah. Yeah. Oh, good point. Assuming everything else in our baseline holds. That's right. Which is no recession.

We job market, but no recession. Yeah, good point. I think another point worth mentioning is, and it's something I encounter talking with clients and asking the same type of question, there's this expectation that it's going to be 20-22 again. If inflation's coming, it's going to be 9% year-over-year inflation like we had in summer of 2022. And we're not talking about that.

We're talking about a 0.35, 0.4% month-over-month increase sustained for a long enough period that we get to that 4% inflation. So it's not as dramatic as recent experience. And I think that's kind of bleeding into people's perception of how bad this is. Yeah, just given recent experiences. Yeah, the other question I get from folks is, is this going to be persistent? I mean, should we really, I mean, yeah, it's going to go to three and a half to four percent. But then that's the end of the story. The price level has adjusted to the higher tariffs and inflation will moderate back in that, you know, no harm, no foul. What do you think of that argument, Matt?

I think that's a sound argument. I think there's, of course, a ton of risk, especially if you're getting a constrained amount of data points to make that judgment for a period of time that's really important. But I think that's the price increases we're talking about are one-time cost increases. Cars aren't going to cost 15% more every year. It's a one-time level shift. chipped up, and that's the calculation the Fed's making. And I think it's sound. But of course,

inflation expectations, very important to watch. If people, businesses, expect these things to be embedded and kind of persistent, then it gets much more difficult in the policy prescriptions or much more difficult. And the economic pain is much, much more pronounced. But in general, it should be considered a transitory to go back to an formally... I'm sure I use that word. I'd like forcing it in to see people squirm like the conference yesterday. Hey, Chris, what do you think about that argument? That this is one-off, it's not going to be persistent. I'm not going to use the word transitory, but you know, you know what I mean. Yeah, yeah, I think in theory it should be, right? But I worry that the, because of this elongation now,

because it is kind of getting stretched out over time for the reasons we, we described, that the expectations could be readjusted or anchored at a different level. It could be that consumers are getting more comfortable with the idea that we're never going back to 2% inflation, and they start to move up their expectations, and that could kind of move the goalposts, if you will. So I don't know, the other thing I'm looking at, I'm trying to follow closely is we spend a lot of time on the good side of the ledger, right, looking at prices of the tariff-sensitive goods.

but the services excluding housing has been extremely persistent as well. We haven't really seen much of that budging here. And to Matt's earlier point about immigration, some of those effects, you could see that kind of sticking around that those prices on services may not go down all that quickly. And so that's the part where I worry there might be some greater persistence here than many are expecting. Yeah.

I mean, the key here is inflation expectations, as Matt pointed out. And they feel fragile to me. I mean, consumer inflation expectations, they're up. I mean, if you look at the surveys from the University of Michigan, the conference board pretty clearly. I think the New York Fed survey, the consumers doesn't show the same increase, but the others indicate that consumers think there's going to be more inflation debt ahead. And then the other thing I were,

bomb market inflation expectations, I think they're more stable, it feels like, last I looked, but what I worry about there is all this is happening in the context of Fed independence, right? There's questions about is the Fed independent? And if they're not independent or their independence is impaired in some way, that might argue for, you know, higher inflation down the road. And at some point, bond market may internalize that and you see inflation expectations move up at just the wrong time. At the time, inflation is actually, you know, early next year. And maybe this becomes more embedded. you know, more persistent than people think just because of that dynamic.

What do you think of that argument, Chris? Possible. It doesn't seem like the button. It's not like the money. Not really putting a lot of weight on that aspect just yet, right? Oh, yeah, not yet. I guess a lot depends on who President Trump nominates for the Fed chair. I guess that will be key here.

I think we're going to learn pretty soon in the next few weeks, the month or two. I think it was in December, right? Is it in December? Okay. That's why I last heard. Yeah. Okay. All right.

Okay. Okay, very good. Let's turn to – I do want to get to consumer credit, the banking system. That's kind of been top of mind here this past week. There's a lot of concern about eroding credit quality and subprime auto, and there's been a couple of bank – a couple of bankruptcies and some banks have stumbled around lending. So we'll come back to that. We'll also play the game. Before we go there, Matt,

Matt, let me turn it back to you again. I know you're looking carefully to other private sector data. And I should also say the unemployment insurance claims data from the states because those state labor departments are still open and they're still producing their estimates of UI claims, which is a very important barometer of what's going on. So let me turn it back to you. What other data are you looking at that we got this past week that provides some insight into how things are going? Yeah, the top of the list will be, as you mentioned, the UI claims. that we're getting from states.

And it's tempting, and we call this alternative data, but really when it comes to the state data, we're able to build and mirror what the national UI estimate is week to week precisely just given the state data. So there, we're a few states short as of this morning, but claims remained low. So they jumped a little bit last week from 224 to 234,000. And then this week came back down. So under 220,000 this week, given what we're going to? we have right now, that could change a little bit. Some bigger states haven't reported,

but generally consistent with the story of people not being laid off. Maybe hiring isn't up. Hiring definitely isn't up, but there still is a persistent reluctance from firms to lay staff off. I'm sorry, I missed that number. What was the number? Initial claims for UI, your estimate? $217,000 for the week. Oh, that's low. Yeah. So it dropped again. And it's been interesting looking at, you know, how to aggregate up to this estimate because you see the seasonal factors that the government Department

of Labor is using. I've never scrutinized them to any degree week to week, but they changed pretty dramatically week to week. So I was interesting. I mean, we're still at a point now where claims are expected to be low and they get seasonally adjusted upward for the purpose to kind of smooth things out throughout the year. But pretty dramatic changes week to week, which is interesting. But I'm sure that's underpinned by a lot of reliable trends. That's one of the reasons why when you look at the UI claims, often economists like us would say, look at a four-week moving average because there's all kinds of vagaries to the data, including seasonal adjustment.

Yeah. And even going back and looking this week a year ago, this week in 2018, what do we look like there? And all signs there point to a relatively stable, but low, benign number of weekly insurance claims. Continuing claims, we can do that too. So the people that have been laid off or are collecting unemployment insurance and are still doing so. So what that signals is less so a deterioration currently, but just an unwillingness from

firms to hire. These people can't find jobs. And there continuing claims are elevated. They ticked up, sir, 1.92 last week, 1.93 this week, very minor. But we're not seeing it get any easier for people that don't have a job to find a job. consistent with the no hire, no fire story that we've seen characterizing the labor market and throughout summer. So this week elsewhere, it's a matter of Fed surveys.

Can I just stop? Chris, anything on the UI claims there that you want to bring up? No? No, I think that. No, okay. Very good. Sorry, man. I just wanted to see Chris had any comment there.

But go ahead. And elsewhere, when we look at data, we end up, I find myself from a narrative sense, like pooling everything. So it's okay, we have all these three or four Fed surveys or this consumer sentiment survey. And what's the general, what's the general message being displayed? So with the Fed surveys, we got from the New York Fed, Philly Fed, they're sending surveys out to manufacturers in the district in that Federal Reserve district. So here referring to two districts in the Northeast, nothing out of the ordinary demand is okay for, according to the respondents to these surveys. Price pressures are rising. Employment, not robust, but not falling off

the cliff where these responders, these surveys, these businesses are not responding and saying they're cutting headcount, but they're certainly not aggressively hiring. So that's generally the trend there. Can I just say, Matt, on the Fed surveys. The one Fed survey that historically has been a very good leading indicator has been the Philly Fed survey, believe it or not, which is weird. because in fact, Philadelphia's Federal Reserve District, this is our home district, is small, right, compared to the others. But historically, it's done a very good job of presaging problems in the economy. And right last month, it was pretty weak, wasn't it? It was negative 12 or something, negative 3.

I hope I'm not taking anyone's stat, but, you know, it was pretty weak. It was weak. It dropped from positive 23. it's a diffusion index, essentially taking responses that do, you know, the number of the share of respondents that are saying they expect conditions to improve, minus the share that expect conditions to worsen. So you fell from 23.2 to negative 12.8 is generally, anything under zero is, is a contraction and activity. But within that index, I look at components and right now, I think the most important thing is like current business conditions, so new orders. Did you see more orders in September

or August. And that's still positive. And that's, to me, a clear sign that we're not seeing pulling back in ordering, pulling back in demand, and the kind of dynamic that would lead to, you know, ramping down production or laying staff off. So it's not great, but it's not as bad as the top line decline would potentially signal. So still worth watching. Chris, I get this sense that Matt's kind of a glass half full kind of economist. What do you think? But this feels that way to me. Maybe this week. Maybe this week. I was in Texas this week and they thought I was much more pessimistic than they were. But that is- Where in Texas?

Where are you? I was in Dallas and Houston. I was in Dallas a couple weeks ago and they pulled me down the pessimism. No? No, it wasn't, I wouldn't call them optimistic. Oh. That was maybe a little bit more critical of trade policy and some other things happening. Oh, I see.

Made me come off as a pessimism. I got it. Got it. All right. Any other data you're looking at that shed some light on what the heck's going on here? The NFIB survey, so National Federation of Independent Businesses is small businesses, is who this index is capturing. Sentiment, how are you feeling about prices, hiring, current general business conditions?

A weakening there and the most important indicator within that survey is about prices, too. It's been a pretty reliable lead for where prices are headed. So asking these survey respondents, where do you plan on increasing prices in the next six months? That's tracked really well with the CPI over time. And that's rising. It's high and rising is how I would describe it. So that's an interesting thing to watch. So the expectation that the tariff, to me, that's a proxy for how much of the tariff pass through is happening.

Well, if these businesses say it's still coming, then it's hard to say that we're over the hump and that these prices are already in the rearview mirror. So I think it's an indication that like our forecast suggests Q3 or Q4 into Q1, first half of 2026 is going to be inflationary as the past three months have been, but likely more so. Got it, got it. Hey, Chris, anything in the alternative data, the private sector data that you're looking at, you want to call out before we move on? For the labor market. And it's just generally, you know, anything that shed some light on what's going on. Oh, yeah, I guess opening, job openings are one thing we can look at, right? I think the alternative data, if you look at listings from Indeed or LinkedIn or other sites, right?

I think that's a pretty good measure. They may not capture the layoffs all that well. But in terms of open. Oh, you mean the postings, the job postings. Job postings. Oh, okay. Got it. Sorry.

Yeah. Yeah. And that's certainly weak still. Still trending down. Yeah. Trending lower. Consistent with what Matt is seeing. Okay.

So no higher. No higher. No higher. No higher. Yep. Right. continues. Okay. Which means an economy that's kind of soft struggling, but not in recession, not going apart, but yeah. It's just kind of hanging in there. Sputtering and all. Yeah, right.

Okay. Very good. Well, let's turn to the other issue that's come to the fore here. It's been kind of percolating out there for some time, but they came to the fore in the last, this is the past week. And that's consumer credit quality. Subprime auto is the poster child. There's been a couple of bankruptcies, high-profile bankruptcies in that space. And then it looks like there's been a stumble or two in kind of the lending portfolios of some of the big regional banks. And, you know, everyone's trying to figure out, are these things tied? Is this something, something deeper, broader going on here that we should be worried about? Chris, let me turn to you. Did I characterize that kind of concern, right? And how concerned are you?

you. Yeah, I think that's the, that is the concern. We've seen, I've really triggered by the bankruptcies you mentioned and some of the problems we're seeing in some specific parts of the consumer credit market. In terms of how concerned, I'm not all that concern. I don't see this as yet as a repeat of say the Great Recession or some of the other, you know, assumptions that are being made here. If we look at the consumer credit data broadly and we have a great database from Equifax, We get a feed of consumer credit data every month, and we're still getting that. That's not subject to the shutdown. Based on that data, if you take the broad macro view, consumer credit looks okay, right?

We have debt service ratios. That's the amount of money people have to pay every month on their outstanding bills for their mortgages, auto loans, et cetera, versus their disposable incomes. That's still relatively low and stable, kind of where it was back in 2019. So it's up from the bottom that we had during the pandemic when people couldn't spend and they were paying down their debt. But it's not screaming any real problem there from a macro perspective. Credit growth also fairly tame across all consumer credit products. So it's not as though things are exploding here.

And even delinquency rates from a broad macro perspective, still relatively low across most products. Yeah, they're up from the pandemic. and in certain sectors, they are above where they were in 2019, like auto. So that's clearly a sector that we want to focus on. And as we look at the auto lender portfolio, we can see that there is definitely stress in those subprime type of borrowers. So there's a pocket of risk there. And I think that's now been revealed by some of the bankruptcies.

But I don't see it as a broader kind of issue in terms of consumers really struggling either that they get credit or to make payments. Their delinquency rates on credit cards or personal loans have been relatively stable recently. They're higher than they were in 2019, perhaps, but they're not accelerating. So what I see is that some of the troubles we're saying here are in pockets of the market. We did have looser lending back in 22 and 2023 in the height of the pandemic because of stimulus checks, people having a lot of need or demand for additional credit. Credit scores improved. So there were some credit score inflation that went on. Some people got offers for credit that they may

have not had in the past. And now you're starting to see some of those chickens come home to roost, right? Some of those higher delinquency rates. But I think overall the industry has kind of got that contained, or at least aware of this issue. And you have seen credit stands It's tightened up in the aftermath, and more recently, the loans that have been originated are of higher quality. So I think there's that pocket of loans that needs to go through, and some of them certainly will be charged off. But I don't see this as a broader issue that spills over and really causes a recession at this point. Yeah, I generally agree with that kind of prospective characterization. But it does bother me a little bit in the context of a 4.3% unemployment rate.

Sure. It's unlikely unemployment gets better. The odds are that, you know, I'm not saying we're going to go over five, but it feels like it's going to continue to migrate higher here, given the fact the economy is growing at a rate that's below its potential and we're not creating any jobs. And even though the potential job growth is lower because of the immigration policy, you know, unemployment is still notch and higher here. So in that context, it just feels uncomfortable that subprime auto delinquency rates are higher today

than they've ever been in the data that we have, which includes the global financial crisis, the great recession, as you say, when unemployment was 10 percent was 10 percent. So doesn't, what do you make of that? Doesn't that bother you? No doubt, no doubt that I'm not saying that everything is just fine, but in terms of the broader picture, most most borrowers are not in that subprime category. That's a relatively small share of the total. And define that. I mean, in my nomenclature, subprime would be a score, let's say a FICO or VATO or Vantage score of 620 and below.

Would that be subprime? And then near prime would be 620 to 660. and then prime would be north of that. Then you have super prime. Okay, I got that right. That's right. That's right. We're on the same page there.

So that's a pretty small share of the total pie. Certainly if we think about mortgage as well, we're still not originate a lot of subprime type of mortgages today. But even if you just focus on everything outside of mortgage, subprime is still a relatively small share of the total. Nonetheless, you're absolutely right. I am worried, you know, given the labor market dynamics we have here, you're right, I don't see this improving, the hiring is low. So if you are a borrower in that category, you lose a job, it's very difficult to find a new job, right?

That certainly is leading to a path of higher delinquency. So that has to be taken in consideration. But again, if we look at the other end or the broader picture here, most borrowers do have employment. They have a lot of equity or wealth that they've built up in their homes, if they're homeowners. So there's a little bit more financial freedom there to manage some of the weakness that might be coming than the folks in that in that subprime category. Well, by my calculation, I'm looking at the same ECOFax data, this subprime. And I have to admit, I think I, in this case, did subprime and near prime, so 660 and below.

Auto debt outstanding is, I don't know, $400, $450 billion outstanding in subprime and near prime auto loans outstanding. Now, I think that's as a smaller than it was in the GFC, the great global financial crisis. But, you know, that's not, you know, just for context. I'm wrong, but I think there's probably, if you clued mortgage, what, $15 trillion in household debt outstanding, consumer and mortgage, something in that ballpark, I think. So $400, $450 billion is, what you're saying is that, okay, yeah, we got problems there,

but in the grand scheme of things, that's pretty small piece of the pie. And therefore, from a macroeconomic perspective, you know, we need to watch it carefully, but at this point, it's not sending off red flares. That's kind of what you're saying. That is. That is. Now, you know, if you have a problem here, you have to worry about the other markets. Maybe we're missing something in credit card or personal loans, right? So clearly, got to watch it, but we're not seeing those signals just yet. Well, I don't know. What about student loans? I mean, student loan delinquency rates, they jumped again in September, according to the Equifax state. I think we're close to 10% of all non-deferred student loans outstanding are in delinquency. I mean, that, and that, you know, I Obviously, he's up from zero a year ago. And that clearly goes back to the fact that student loan borrowers have to begin, between now and then have to begin, had to begin repaying. And if they don't repay on the debt, then their scores get affected.

And ultimately, their wages will be garnished because these are federal government loans in most cases. Doesn't that add to the stress level here? It does. I think we have to be a little cautious in looking at that number, though. We had five years of moratorium, right? So we had a pretty significant backlog of student loan borrowers who would have been charged off, right? They would have defaulted years ago, and now they're being processed. So I'd expect that, yeah, the liquidity rates look high for a while and then things normalized.

I think some borrowers are still having trouble contacting their servicers and figuring out how to actually pay. So I think there's still a lot of movement in those student loan portfolios. But abstracting from that, my greater fear is just, you know, these borrowers are having to repay, and that's going to put stress on their budgets to some degree, right? Even if they have the ability to pay back the loan, that means it's lower spending somewhere else, or they're readjusting their budgets over what they were doing over the last five years. So that clearly puts some downward pressure on the spending and an economy overall, I'd argue. So that certainly is a concern.

I don't know about the spillover effects of student loans. I haven't seen any real strong evidence that that's really causing, say, the delinquencies in auto lending or in the other consumer credit products. I think thus far, we're still trying to figure out where this student loan delinquencies ultimately land in terms of their equilibrium. I guess the other consumer credit category to focus on is credit cards. Do you know that data well, Chris? I know delinquency rates are up. They're higher than they were pre-pandemic, but they're still well below kind of GFC kind of levels. Is that right?

Do I have that roughly right? Yeah, that's right. And if you break it out by vintage, so when these credit cards were originated, you do see that trend where those cards originated back in 2021, 2021, 2022, 2023. Again, kind of in the teeth of the pandemic, when credit scores were in. proving those particular originations, those particular credit cards have performed worse than what we've seen historically. But more recently, the 2024 and now the 2025 credit card portfolios seem to be performing a bit better, right? They're still not as pristine maybe as what we saw

back in 2019, but they're moving in that more positive direction. And that's consistent with credit card lenders tightening up on their standards. And that's what we can see in the Fed senior officer survey. Okay. So to summarize, it feels like there are signs of stress, no doubt about it. And this is in the context of very low unemployment. So if there's any significant, meaningful pickup of unemployment, we've got a bigger problem that could materialize pretty fast. But barring that, that's not our baseline forecast. We should be okay. It should be okay. I mean, it highlights, you know, kind of a broader dynamic. that the folks in the bottom parts and middle parts of the income distribution are struggling here. Yeah, but it's not enough to become a macroeconomic event by itself. That's what you're saying. That's right. That's right. You've got to move sideways here in terms of performance as we readjust. And then, you know, if our baseline is correct, we should see some some improvement as we get into the later half of 2026.

But still, it's going to be some pressure here on portfolio. So I'm not arguing that things are rosing. everything's going to grow, but I don't see things falling apart either just yet from a broad macro picture. Yeah, and I guess lower rates should help, right? The Fed follows through and lowers rates. That should help, you know, credit cards. It should help home equity lines. It should take pressure off, even auto loans because they're kind of intermediate term

loans, you know, to some degree. Personal loans, yeah. Personal loans. Okay. All right. So we need those lower rates. All right. I guess the other thing to think about here, though, is whether the consumer credit problems

have an untoward impact on the banking system and financial system more broadly. And that's when you get into real problems, right? When the financial system is infected by defaults in bankruptcies. And we are starting to see some of that creep feels like. I mean, I don't know. I'm asking. Is that dismore anecdotal? this goes to Tri-Color and first brands and some of the regional banks.

I guess there's some problems with the lending that they've done, although I'm not sure that's consumer credit. I think that might be more wholesale lending. I'm not quite sure. But anything there we should be worried about? So it seems as though these most recent events or at least some of them have been fraud-related, right? So that's interesting.

In the case of Tri-Color, so it's auto-lending. So it is consumer-related, but it seems to be very isolated to that company's practices in terms of some of the alleged fraud that went on with vehicles being posted as collateral twice or multiple times. So it seems like it's more anecdotal, if you will, than a broader trend. But the fact that now we are seeing several of these occur within a short period of time is certainly making investors wonder, you know, are there more? issues out there that we need to worry about. So I think it's important to be vigilant here. I think we've mentioned on the podcast. We've been a little bit concerned about the growth of some asset class like private credit, right, going so quickly in recent years. And banks do have exposure to the lenders or to the funds that are perhaps purchasing or investing in these private

credit credit assets. So I think some of that is bound to to turn up here. I'm not quite ready to say this is a systemic problem, but certainly I think there are some issues here that warrant our attention, a closer look. I'm sorry, Chris. I was going to ask Chris if he subscribes to Jamie Diamond's cockroach comments earlier this week. I don't know if you came across those.

I did see that. Sounds like, yeah. I do. I think it's pretty similar to Mark's old quip about the weeds. If something is growing like a weed, it's probably a weed, right? That's a good one, right? This is from a chief risk officer of a major bank back in the day that ultimately failed. And he said to me, you know, the best way of assessing credit risk is if it's growing like a weed, good chances of weed.

So if you get these, I know that it's pejorative and something should grow quickly and they're fine. But if it's growing quickly, you better go take a good hard look at what's going. going on, particularly if it's in some form of lending. Right. So I think it's a good wake-up call. I think that's what's been going on in the markets recently. Investors are saying, okay, well, let's take another look here because things have been seemingly going pretty well in these markets, but let's look a little deeper.

So I think that's healthy. But again, I don't see really the conditions for broad, widespread type of systemic type failures in terms of bankruptcies or consumer loan defaults either, just yet. Got it, got it. Matt, do you have any views on this? More of a question. I think it's been in the background for a while, just the size of the private credit market, how much of that has made its way onto bank balance sheets, even if there's regulations supposed to push that risk off of bank balance sheets after the financial crisis. So much of the non-bank financial sector's credit growth is being enabled.

by loans from from normal commercial banks. So that risk generally, I know this is work you guys have done, is thought of as bad, but not huge. Is that the conclusion? Well, bad's a pejorative term. I, you know, I'm not sure I'd use the word bad. It just bears close watching because it is growing very rapidly. That is bank lending to private credit funds.

And banks are doing it because it's just more. efficient, you know, from a capital perspective than, and I think even a liquidity perspective, then, you know, lending directly. And they have more, they've got the balance sheet of the private credit fund that's helping to support the lending that they're doing. We're getting more transparency here. I mean, I do think as part of regulatory filings, we are getting more oversight. Last I looked, the exposure was several hundred billion. I hesitate to say, you know, three or four 100 billion, something along that line. And that, for context, the overall private credit market, I think broadly defined would be $1.7 trillion, you know, something like that. And for even further

context, that's kind of a bit larger than the high-yield corporate debt market or the leverage loan market. So it's, you know, $1.7 trillion is not nothing and it's growing quickly. So it bears close watching, particularly if banks continue to lend aggressively into that space. But it doesn't feel economically financial system life threatening at this point. I mean, the direction of travels certainly a matter of some concern and we should be watching carefully, but it doesn't feel like at this point it's the thing that will blow up or do the system in or do the economy. That's my sense of it at this point. Yeah. Okay. Okay. Let's play the game. The statistics game.

Does everyone have a stat? Yeah. Okay. And maybe we'll play the game and then I know we have a couple of listener questions. We'll take those and then we'll call it a podcast if that's okay with everybody. You guys got time? More time? Absolutely.

Okay. Okay. Very good. Let's go. Let's do it. The best stat is one that is not so easy. We get it right away. One that's not so hard.

We never get it. And if it's app propoded to the topic at hand, which is, Well, you heard the conversation so far. And there isn't a whole lot of data, so I wouldn't hold it to it. All the better. Matt, do you want to go first? Sure. 3.04.

CPI inflation? Year over a year through the month of September? Maybe. Maybe. That's not what you had in mind. Not what I had in mine. Of course, CPI inflation. No.

Not what you had in mind. Not what I had in mind. Is it an economic statistic that came out this week? No, not in the way you're thinking. Oh, it's not in the way I'm thinking. We got some units on this? I thought I said 3.04, didn't he? 3.04, I said units would likely give it away, but I can do that.

Oh, no, don't. 3.0. Is it time? Is it like months or no? No, Chris is close. or he's adjacent. Oh, would you say, Chris? In units.

What were the units you said, Chris? I said not percent. Okay, so he's far off. It's a ratio or something to something, which is a percent, but no. No. Percentage points? Oh, percentage points. It's a change in percent.

Oh, well, I know something is up three percentage points. That is the unemployment rate for people that are ages 20, 20 to 24. That's not what you had in mind either. Not when I had mine. It's, it's, do you tell me when we can. The effective tariff rate is up three percentage. No.

Okay. Chris, I don't know. You want to call it. Spread? Yeah. Spread. Some type of interest rate. Oh, fresh.

Yeah. So high yield corporate bond spread. I know, Mark, you watch it closely. I do. Yeah. So, apropode, where we, we ended the conversation a moment ago. We should have had that.

Low, but yeah, I thought you would have. Yeah. So low but rising a little bit given the credit concerns, the stuff that we just talked about, the potential that there's more than just one company using dubious tactics on their balance sheet that come to be exposed and banks and non-banks start to see some bankruptcy and losses that could ripple through the rest of the economy, but could certainly create some financial market volatility. So just to make it clear to the listener, you're saying the difference or the spread between the yield on high yield corporate debt, which is below investment grade, lower quality corporate credit bonds.

And the 10-year treasury is 3.04 percent percentage points. Yeah. That's right. Typically, it's five, I think. And it got as low as two in a quarter, not too long ago. but you're saying it's still the thin, the spread is still thin, but it has gapped out a bit here as a result of the credit concerns. It's trending higher, yeah.

Trending higher. Well, we'll see. I don't know if trending might be the right word. It's higher. For the moment, it's higher. A little higher. Yeah. All right.

Okay, well, that's a good one. That's a really good one. Chris, you want to go? Sure. It's alternative data. Oh, boy. likelihood of you getting this is near zero

but I'll throw it out here I think 10 people in the audience will be happy to hear this statistic and know exactly what it is right away Oh 10? Can you identify? Can you give us a hint about who those 10 people are? No.

Oh, all right, go ahead. 115. 15. So you're not going to give us to you? Some people are yelling right now and screaming. Happy for them. Oh, really? Oh my gosh.

Matt, any ideas? Is it an index value? It is an index. Oh. NHAB. No. Is it housing related? No.

National Association of Home Builders. No? No. A private entity produces this index on a monthly basis. It's not consumer confidence, is it? It is not consumer confidence. It's, uh, huh. Can you give us some?

a hint as to what part of the economy it sheds light on? Sure. It's an index. It's not consumers. Therefore, it's businesses. Businesses and not big businesses. Oh, it's an FIB survey number? It's not the NFIB. It's a small business index from FISA. Oh, there's like zero. Oh, the 15th to 10th. Oh, now I get it. Now I get it. Okay. Now it all makes sense. Now it all makes sense. Yeah. So it's a what I like, so FISAver's large payment processor right They see a lot of the data. And not all that dissimilar from the MasterCard data that we were talking about just a few weeks ago. So, right, they process all the payments for credit cards, debit cards. And so they see a lot of movement.

And the one thing in particular they can track is the performance of sales at small businesses. And I think that's important as a kind of a canary here in terms of what's going on. $115 is there real? So it's as an inflation-adjusted measure, and that number is down 0.6% on a year-year-year basis. It's down a month-to-month as well. So it's certainly indicating some weakness on the part of businesses. And if you dig into their report, you see that there's evidence of consumers moving towards more essentials. the spend on discretionary items or discretionary businesses is down more substantially than

that we see at essential businesses. So I think it's important to track this and see how those. I think, again, small business is important sector of the economy to watch closely. So the bottom line is small businesses are struggling? They're struggling a bit. Yeah. Yeah. Again, it's kind of consistent with our overall.

They're not collapsing. Right. But in some areas, right, they're getting hit harder than in others, right? If you are catering to more the discretionary spend in a small business, that's a harder market than if you're in the essentials. Right. Any insight into which industries? Do they provide any data there? They do.

Food and beverage. Food and beverage. It's actually struggling a bit more than some of the others. The grocery is holding its own, although, you know, certainly prices are impacting on a nominal basis. So, yeah, there's a lot of detail, a lot of regional detail and industry detail that we can take up. Good. I should be watching that more carefully. So you're saying the 10, was it the 10 folks or 15 folks at FISA, are very happy? I think they got it right away.

We got it right. Got it. Maybe it's more diffuse. I certainly hope it is. It's a pretty good measure. All right. Okay, I got one. 14.9%.

Let's just say 15%. And I will give you a big hint. It has to do with the banking system. 15%. A number that came out this week or is this just a... No, comes out every quarter, you know, with the banking statistics. What is 15%? Matt, any...

Is it a growth? It's from this. Is it a Senior loan officer survey? No, no, this is every, oh, that is quarterly, right. No, this goes to the health of the banking system, 15%. Oh, is this capital? Yeah, capital ratio, tier one capital.

Yeah, 15%. You know, going back to your point about the system being, you're not overly concerned about, you know, something breaking in the system. The issues are more, feel more idiosyncratic. But that's a very, very, high level of capitalization, very high. So, you know, take a pretty severe erosion and credit and big increase in loan losses to kind of undermine that in a significant way. And the reason we

know that is we, the banks go through the stress testing process, the so-called C-car stress testing process, which they've been doing since the financial crisis, the GFC. And they've been steadily raising their capital levels. And they're now quite high. quite high and 15% is well above you know even under the so-called severe adverse scenarios that they run as part of the stress test all the major banks all the key banks including many of the you know kind of mid-sized banks you know you still have significant excess capital you know the losses in those scenarios undermine or weaken the capital ratios but they're at the end of the today is still very well capitalized.

So just, you know, I know those are averages and you can still have banks that are run afoul of that. So you've got to be careful of the distribution and look at the banks that are, you know, at the tail of the distribution. But at least in an aggregate on average, the system feels like it's on pretty solid ground, a capitalization ground. So I feel pretty good about that. Okay.

Anything else on that before we take a couple of listener questions and then we'll call it a podcast. Chris, anything on the banking system or anything else? You want to bring up before we move on? No? No, I think there's certainly consolidation going on in the banking system. There's some other threats when we think about stable coin and other things we've talked about in the past. But, you know, I think on the edges, I agree with you. I think overall the system is pretty solid here.

Yeah, you make a good point. I mean, under the Trump administration, it does feel like the bank system is being less, what's the right word, not as tightly regulated. And in a lot of different ways, and one of the ways is for allowing for more mergers within the industry. And that feels like that we're going to see a lot more M&A activity, a lot more consolidation of the industry here as a result going forward. And there's a lot going on in the banking system that we need to watch. We talked about private credit. We talked about consumer credit.

I mean, there's also the questions around crypto and you mentioned stable coin, a lot of concerns about what that mean, so there's a lot of moving parts here that we need to watch very carefully. But right now, it just feels like the system is a pretty good shape, good enough shape that it can digest whatever feels like could be thrown at at this point. So anyone push back on that? Chris, would you push back on that? No, okay. All right. No, I'd say, you know, we had this data drop this week from the government, but filling that partially, I don't know about if you've had the same experience, but I got all these reports from the Federal Reserve. They've been releasing a lot Yeah, good point.

Speeches and reports. And certainly they're anticipating some reforms to the stress testing that you mentioned earlier. So a lot, a lot going on from a Fed perspective, from a regulatory perspective. From a regulatory perspective. You think that's by design, Chris? Is that what you're saying? Not because of the shutdown, per se.

But I think it just, I think there's going to be more transparent because of the pressures they're under. Is that possible? Or it's just, I think it's just, this is the regular cycle. but typically we have all this other news going out. Oh, I see. Maybe it gets pushed down. It gets lost.

It gets lost. Now because there's nothing else, we're talking about. We're focused on them. Yeah. Right, right. Oh, good point. Good point. So, Matt, you're going to step in for Marissa here and fire a couple of listener questions

towards us? There's a large shoes. Yeah, yeah, I can do that. Okay. Fire away. Big shoes fell. First is government shutdown. How long do we expect?

Has that changed? And if put that to the side, how long would it have to be to push the U.S. economy into recession? So the government shut down being the impetus for a recession. Oh, interesting. What do you think, Chris? Great question. I guess maybe you can shut a little bit of light on this for me. I thought one factor here would be the payment of military, of soldiers, right?

Paychecks coming out this week. And I thought that would be the impetus. And also getting back to the BLS question, of recalling some of the CPI work. It seems like there's a lot more flexibility in terms of paying government workers than I thought. Can you shed some light on this for me? I thought shut down. Yeah, yeah, good point.

You're saying that it felt like there were some force. mechanism here. One was on October 15th, the military would get paid. If the government was shut down, they would not get paid. And therefore, that would put pressure on ours and Ds to come together and figure this out and turn the lease back on. But here we are. And the military is getting paid regardless. And so that's no longer a forcing mechanism. And if push comes to shove, then the BLS can be reopened to produce whatever stat that might be necessary. or by law or anything else. So there's a lot of, there was a lot more leeway here, which by the way, it may not be legal the leeway. It's just the administration is doing it and,

you know, taking its chances and see what, you know, if they're sued and what happens in the courts, which could take some time. So, you know, I think, but that does reduce the pressure on the parties to come together, right? So what exactly? is the forcing mechanism. And when is that going to occur? And I'm coming to the conclusion that the forcing mechanism is only going to be when something breaks, you know, because government services aren't getting done. Some government services aren't getting done. And, you know, historically, if you go back to the 2018-19 shutdown, that was the longest in history five weeks, that only came to an end because air traffic was getting snarled. The air traffic controllers

when TSA check point workers weren't coming to work. They were getting other jobs to generate some cash to pay the bills because they weren't getting paid. And that made everyone collectively very upset and that put pressure on lawmakers to come together and reopen government and start paying people. It feels like that's something like that's got to happen here. And maybe when something breaks is going to be, you know, sound a lot louder, or shatter more things.

Here I am in Salt Lake City. and my plane's delayed, like three hours. Now, what's that all about? Is that, I don't know, air traffic control? I'm not sure. But, you know, that's pretty annoying. And if I'm more people like me get annoyed, you know, at some point that might pressure. But that all goes to say, this could go on for a while.

You know, the government's been shut down now for, what is it? Over two weeks. And, you know, if you told me it's going to go on for a month, I'd say that sounds. at the very least a month. It could become the longest in history more than five weeks? I say, yeah, I think that's a real possibility. Now, I don't know if it's a month or six weeks, that's not enough to push the – it's not – there's nothing good that comes out of that. There's only downside, and I think with each passing week, the government is shut down that does more damage.

So if it's down for a month, maybe it shaves two, three-tenths of percent off of GDP annualized in the current. quarter, if it goes on for six weeks, maybe sheaves a half a point off of growth, you know, if it extends past Thanksgiving into December, then I think that's real money. And then at some point financial markets will take notice. And stock markets, investors will say, hey, what the heck's going on here? And if the stock market sells off, then, you know, the damage could be enough to push us into recession. But I think it'd have to go on for a while. You know, it'd have to go past Thanksgiving into December before it does enough damage, you know, to push the economy into some overboard into some kind of recession. That's under the working assumption that

something big doesn't break. You know, when you get into these kinds of situations, there's all kind of unintended consequences. Things you can't even imagine could happen. And then they happen because of the stresses that are being created. I'm assuming that that nothing big breaks we don't have one of those big unintended consequences, but if we did, then, you know, recession would happen sooner rather than later. So that's kind of how I'm thinking about it. Does that make sense? Matt, does that make sense to you? Yeah, I think the holiday season is a nice way to frame. It's like, right, if we're here there, if we're here in the peak holiday shopping season, even, yeah. Yeah, that's a great point. Right. Between Thanksgiving and Christmas, the key shopping season,

And if we're in shutdown mode, then the recession risks become high, much higher. The airports were already hectic that time of year. Yeah. Dramatically more. Yeah. Okay. All right. Let's take one more question.

Okay. A little bit lighter. A book recommendation. Good book on economics and statistics that you would offhand recommend as somebody interested. I assume if they're listening to this podcast or have read something on the topic. Do you got one, Matt? Do you have one that you would recommend? If it's timely, Nick Timmerhouse from Wall Street Journal, his book on the COVID response

from the Federal Reserve Trillion Dollar Triage was his book. I thought that was terrific about like, yeah, just the machinations of what was being done, the political tightrope. It was very, very good. And yeah, so I would recommend that if it's a contemporary look. I don't think the expectation was for Adam Smith to be recommended here, but modern, modern reviews. Yeah, yeah. Chris Gave, one you would recommend?

Gosh, my go-to, which is now a bit dated, is new ideas from debt economist. I was it Todd Bullsholtz. I believe that's the author. But, yeah, not very contemporary, but certainly a good read. And a nice way to enter into economic theory and getting a background of some of the ideas that we're talking about here today. what their historical origins or roots are. Mark? I guess there's a new book out by Andrew Ross Sorkin on the 1929 crash.

I mean, I don't know if it's coming out. I don't think it's out yet. But I think that sounds like a pretty interesting book in the context of the overvalued stock market at this point. What do you guys think about? Have you heard about that book? Yeah, I read a review over the weekend. So I guess some people have it, but mostly journalists. But yeah, that'll be a great one.

Just based on that. I was, as I was, I don't know if I mentioned it on earlier in the podcast, but I'm in Salt Lake. I was in San Francisco earlier in the week at a tech conference. Speaking at a tech conference, it's all AI. And the book that everyone is talking about, I can't remember the name, but it's something like if around AI, if we do AI, we're all going to die. You know, something.

Have you heard about this book? Ezra Klein in New York Times had a podcast with the author and very dystopic kind of perspective on AI. And it sounds like it's a must read. So I think that might be the next on the list of things. Okay, I think we lost Matt, Chris. That's okay because we're at the end of the podcast. Anything else you want to bring up before we call it a day? No, I think we better bail before we get canceled as well here.

Exactly, exactly. Okay, with that, dear listener, I hope you enjoyed the podcast, and we will talk to you next week. Take care now.