Moody's Talks - Inside Economics - Economic Potpourri

Episode Date: August 23, 2024

Brendan LaCerda (not Canadian) joins Mark, Cris & Marisa to discuss a plethora of topics, including the Canadian railroad workers strike, the revisions to the employment numbers, Jerome Powell’s Jackson Hole speech, and the Moody’s Analytics election model. The team takes a few thought-provoking listener questions on the housing market and the savings rate.  Reach out to us with any questions or suggestions at [e-mail]: 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' @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 a group of my colleagues, my two great co-hosts, Mercedin Natale and Chris Dreadies. Hi, guys. Hey, Mark. Good morning. Happy Friday. You guys, your garb is kind of similar. Yeah, we're kind of color-coordinated. And Brendan, too. A lot of dots, a lot of strips and stripes. Well, blue and white, yeah. Plad. I got a know.

Not exactly dots. That's called plaid. Who wears plaid shirts except our other guests? Brendan, Brendan Lacerda, Brendan, you got a plaid shirt on too, don't you?

Yeah, I felt kind of, what's going on? Everyone's got plaid. What? What? Is that a Canadian thing? Plaid?

No, that's an Italian thing. Italian-Canadian thing. Midwestern? Midwestern. A Scottish thing? Wait, wait. Maybe it's a generational thing.

I don't think boomers wear plaid. I just feel like that's the thing. You also think boomers don't wear jeans, but. Isn't that true? No. No, it's not true. Brendan, Brendan, let me ask you a question. Do you wear jeans?

I wear jeans right now. Oh, you are? Oh, okay. All right. Brendan, are you, are you, what are you exactly? Are you an exor or what are you? No, I'm right at the start of millennial, I get millennial, I guess.

Oh, you're a millennial. Right, I'm like one of the first. Early stage millennial. Yeah. And Mercy, you're, you're, are you millennial too? Mercer? No, I'm Gen X. Gen X.

And Chris is an Xer as well, I assume, no? Squarely and can't you tell for my final? That's right. Definitely. Yeah. So the, so the plaid is an exercise. more like a flannel. Flannel.

I mean, it was in the early 90s, and it's coming back. It actually is because isn't Congressman Waltz, the Harris's VP pick, he wears a lot of flannel, doesn't he? I believe he does. He's a flannel kind of guy. It's from Minnesota, so, yes. Yeah, true. Right. Okay.

Well, we've got a lot to talk about. You know, we're kind of ruminating over, you know, what we were going to chat about here. And it's a it's a po-pery. It's an economic pot-pery. A lot going on this week. So let me list the things that kind of are on the agenda. Oh, and by the way, we are going to take a listener of questions. We have a boatload of questions.

We're going to take them at some point here. And just to remind the listener, you've got questions far away because we find them very useful. And I think other listeners do as well. respond to them. Where can they send those, Mark? Where do we send them? Where can they send them? How can they contact?

Some of our listeners have actually asked. Somehow I feel like this is a test. He's testing me. Isn't he? He is. He's putting you on the spot. And I'm going to fail miserably. I actually have no idea.

I would want to say help ateconomy.com, but that can't be right. No? It's help economy at moody's.com. Oh, help economy at moody's. It used to be help at economy to come, which is a lot better than what is it? Help, help, help Moody's. Help, help Moody's. Help Moody's.

Moody's needs help, needs a lot of help. No. Oh, what is it again? Help, what? Economy. All one word. All right. At moody's.com.

Moody's.com. All right. You got that, Brendan? I've got that memorized. I'm there all the time. You're there asking questions all the time. All right. Okay.

here's the list. Employment revisions, the BLS released, Bureau of Labor Statistics released, the revisions to the employment data. That's a really geeky thing, but kind of interesting and you should talk about. It's made news for sure. What's that?

It's made a lot of news for sure, even though it is a geeky thing. Yeah, yeah, you're right. We want to talk about, and we asked Brendan to come on to talk about what's going on in Canada, in regard, particularly in regard to the, the rail well what we thought was a rail strike i guess the true to government shut that down

for a while there's we're an arbitration now but we'll come back to that that's another issue uh we've got j pal uh and team at the jackson hall meeting and uh we're now recording this podcast soon after his speech uh at jackson hole and uh i i don't know if you guys caught it but i read that pretty quickly and i've he's finally come around to my view i that i I'm just saying, you know, finally, you know, on inflation. And then the, I also want to talk about the election because a lot going on there, the Democratic National Convention. And, you know, a lot of the Harris folks put out a bunch of economic policy. And we've got some interesting things to talk about in terms of our election model.

And Brendan is well-versed in all of that and thought we could talk about that. Anything else? Anything else on the agenda, guys? Are we going to play the stats game? We'll play the stats game, yeah. Anything else? Any other issues? No?

Okay. All right. So what do we want to begin with? Brendan, I'll leave it up to you. Which one do you want to talk about? I'm always going to want to talk about Canada, but you know, you're the host. I'll let you decide. Should we go with Canada?

We should go to Canada. Although I think that's the most boringest of the... So let's get it over. How dare you? All right. Okay. All right. Let's talk about this Canadian rail strike. I'll have to say, Brendan, I read your piece on economic view. I thought it was a little breathless to tell you the truth. You know, you made this into a big, it sounded like it was a big deal. It sounded like it was a big deal. It sounded like it was a big deal. It's a big deal. I guess it could have been. Or, you know, still is, right? You think this is. You think this is a longer. The main risk is passed, I suppose, but it's not entirely, you know, off the radar yet.

Right. For a little bit of background for, you know, listeners that aren't so versed in the topic. The labor dispute between Canadian rail workers and the two major rail companies. Effectively, the Canadian freight rail market is a duopoly. It's two countries, Canada Pacific, Canada National. Two companies. Yeah. Two companies control 75% of the freight rail in Canada. And by a coincidence sort of of the calendar, or maybe it was sort of planned, both these companies had contract with negotiations

with their workers at the same time. Interestingly, the sort of the core of the dispute was not about wages. It was about sort of scheduling and, you know, a lot of like the rail engineers, you know, going these long trips and, you know, they're away from home for a long time. So it's not about pay, but really sort of a dispute about benefits, I guess. So starting Thursday morning, they walked off the job. So the question I was looking at in the piece was, you know, what is the economic cost to Canada if you shut down three quarters of the country's rail network? And as you can imagine, it gets, you know, pretty ugly.

I put the damages around like almost like 350 million Canadians, about like 250 million U.S. per day. which would be about like 4% of Canadian GDP. But you have to remember, Canada is this natural resources powerhouse. They shift raw materials to the powers production all over the globe. So even though the total value that rail adds to the economy, it represents sort of a tiny portion of GDP, only like 0.4% of GDP. But it's such a crucial element of the supply chain.

network that when you shut it down, just there's huge volumes of goods that can't move. And if the rule of thumb with rail is if you need to move something really heavy, rail transportation is the only cost effective way to do that. So my my sort of story was just looking at the estimates, I mean, this is going to be so damaging. I can't imagine that the federal government would allow it. And, you know, truth be told, Canadian labor law has a clause that says the federal government can step in and force the parties into binding arbitration. And that's essentially what happened. The strike went on for, you know, a few hours on Thursday.

And then by the afternoon, the government quashed it. And so they're back to the negotiating table now. I mean, I suppose, you know, they just legally aren't allowed to strike. But, you know, there are industries where, you know, you think it's things like, you know, police or teachers or something, you're not legally allowed to strike, but, you know, there are, you know, blue flu, you know, sort of coordinated kind of walkouts and things of that sort. So for the time being, you know, the main risk is passed, but this labor dispute isn't resolved yet. So still sort of not clear how it works out. Although with the government involved, is there a real risk that there actually could be a shutdown of operations?

I mean, this is playing out very similarly. If you remember, I think it was in 2022. There was a, in the United States, there was a labor dispute. Was it? I forget, I don't want to misspeak, so I don't remember which one.

But there was some criticism of President Biden at the time because he did the exact same thing. He prevented the strike force the parties into binding arbitration. It took several months and months of negotiations. but there ultimately was a, like a peaceful resolution to that.

You know, I think the, the rail union, the U.S. got most of what they want and, you know, everything went back to normal and short order. I think the Trudeau administration's thinking was that, you know, the last thing the economy needs right now is a sort of reinvigoration of a supply chain crisis and, you know, inflation picking back up again, shortages, you know, why would, it would be a self-inflicted wound. I mean, unlike the supply chain crisis of, you know, 2021, 2022, which was, you know, global and, you know, beyond one person's control, this would be a self-inflicted wound if they let it go on because they did have the power to intervene. So what's the answer? The answer is probably not,

right? It's hard to imagine. It is possible, I guess. I'm not sure, but it feels like this is no longer an issue. It's now in binding arbitration. It will be settled. There will not be a shutdown of operations, right? Yeah, I mean, unless I guess the union wants to play, you know, hardball and dig in and, you know, pressure, you know, the rail operators by, you know, some sort of partial walkout. But for the most part, I think the crisis is mostly passed. Okay. Going back to, I want to broaden this, I'm going to go a bit more narrow and then broader.

on the narrow side, you said the cost of a shutdown of these two rail companies is $250 million U.S. dollars per day. My kind of rule of thumb, whenever I think of Canada in trying to translate that into what it could be to the U.S. because I put it into U.S. terms, I just multiply by 10. You know, the U.S. is about 10 times larger. That's my rule of thumb. Is that a reasonable good rule of thumb? I've checked the math.

There's 350, 335 million Americans. I don't know how many Canadians are there? It's, well, you can always remember it technically is like nine to one, but 10 to one nine to one mental math so much easier. Yeah, that makes it a lot easier. Yeah, let's do the 10 to 1. Mix it makes Canada look, you know, bigger anyway. So let's do 10 to 1.

So that's 2.5 billion per day. I don't know. Christy, does that feel like that's a big deal? I mean, it's a deal. I guess 2.5 billion. That adds up pretty quickly, I guess. That's a deal. That's a deal?

Okay. So I should be clear, that's more of, if you went from normal operating conditions to just you shut down the rail, that's how much you lose per day. I didn't start to factor in the second order consequences of what if this goes on for, you know, two weeks. Inventories are depleted. And now you start having those like knock on second order effects where, you know, prices start surging up because, you know, people can't get inputs to production.

Okay. And what you're saying, what you said earlier is there's not much substitutionary. It's not like you can put this stuff because it's grain and it's fossil fuel, I guess, chemicals. You can't put this really on a truck very easily. Yeah, I mean, that's kind of the, what I was trying to figure out. I actually, the painstaking part was going through, you know, the logs of, you know, all the volumes of all the stuff that shipped and trying to figure out, you know, what's intermodal, what could be moved onto an 18-wheeler, you know, it's relatively light. But yeah, the vast majority of these goods being moved are, you know, stuff that's being mined out of the ground, farm products, metal ores and stuff like that.

You know, really heavy stuff. Coming from, you know, deep inland, you know, northern Alberta, Saskatchewan, I mean, rail capacity, or I mean, road capacity, even like truck capacity, just couldn't pick up the slack. Okay. Okay. So going broad, I mean, one thing I've noticed is there's all these niggly, Is Nickley a word? I think Nick Ling.

Nigling. Nigling. Nigling. Nigling kind of supply chain disruptions all over the planet seemingly, right? You know, the Houthis in the Red Sea and, you know, there's this kind of a string of supply chain issues. And I guess we're a Panama Canal and drought and, you know, just feels like those things are happening on a regular basis. maybe it's because we're just more attuned to it in the post-pandemic period because supply chains were such a big deal. But every time one of these supply chain problems develop, I feel like it's hair on fire.

Like, this is going to be a real big deal. It's going to show up in price inflation. It's going to be highly disruptive. And at the end of the day, not so much. I mean, it has an impact. I'm not saying that, but in the grand scheme of things. And from our, from a U.S. perspective, I think the reason why is because, you know, most of these things are around the cost of goods, and the cost of goods is a small piece of

the total economic pie, right? I mean, if you look at total, if you add up all goods, it's probably 20, 25% of the consumer. I'm making that up, but, you know, roughly speaking, 20, 25%. So it'd have to be a pretty significant prolonged disruption to have big impacts on goods prices and therefore to translate into something more broadly in terms of inflation. I'm not saying it's good. I'm not saying it's not going to show up on the radar screen, but in the grand scheme of things, it just feels like, you know, we tend to get caught up in the kind of the, what's, you know, what's going on here. And it's not, not, that ultimately ends up being less of a deal than, than we think it is. Is that, does that resonate with you, Marissa, at all, what I just said?

Yeah, I think, my understating things. No, I think generally you're right. I think every time there's been some sort of geopolitical, not Russia, Ukraine. That actually did have a major impact globally, less so for us than in Europe. But yeah, I mean, I would agree with you that typically I think it's a bit overstated. You know, normally the stuff that tends to affect this country is more to do with energy prices rather than the disruption of the flow of goods. So that seems to be more, that seems to be more the channel that it would affect the U.S. economy. Right. Chris Brennan, you want to take the other side of what I just said? Or you kind of in line with it?

I'd say so. I do think there's some post-traumatic shock from the pandemic still, right? Certainly. Yeah. Right. So we are sensitive to those supply chain disruptions and they could lead to some deeper disruption. But in general, you're right. They tend to be small, one-off and usually resolve quickly. Or, you know, business is very creative. We can find another way around. it. Right, right. Okay, all right.

Okay, so that's topic number one, Canadian rail strike, supply chain issues. Chris, what do you want to do next? What's, what topic do you want to address? Let's talk about this 818,000. Ah, okay, the employment revision. Do you want to describe that? I think Marissa. Marissa, you're right, Marisa, she's been deep into it.

She's been deep into it. Right, yeah. Go ahead, Marissa. Okay, so this is a, this is the sneak peek that the the BLS releases into what the annual benchmark revision will be when it's released next February with the release of the January 2025 employment report. So we've talked about the benchmark revision again before, but I'll just give a little rundown of what that means. So we have the establishment survey from the Bureau of Labor Statistics. This is where the jobs numbers come from

that we talk about first Friday of every month, payroll employment. That is a sample survey of half a million businesses around the country. Every year, the BLS does a benchmarking of that sample survey to administrative tax records from the unemployment insurance system. This is another program called the quarterly census of employment and wages. So every business, it's required to file tax. has on their record sheet, how many people are paying into the unemployment insurance system. So we have an actual hard, not sample base, but hard count of the number of employees.

So BLS basically checks the payroll survey against this every year. So they have data through now March of this year, March of 2024, and they basically did this benchmarking exercise and released what they think the revision, will be next year when it's released. And right now it's looking like payroll employment between the last time they did this. So between April 2023 and March 2024 has been overstated by a little more than 800,000, according to this QCW. So if we look at the March QCW data versus the payroll survey data, it looks like the QCW is saying the payroll survey will be downward. revised by about 818,000 over that period. Now, it won't exactly be that number when the final

benchmark comes out because we will have another quarter of this data that will be incorporated. There's some other adjustments that the BLS will make. There'll be seasonal adjustment, things like that. But that's the ballpark of what we're looking at. So essentially what we're saying is that over that period, so from April to March of 2024, April, 23 to March of 24, we were looking at average payroll growth of about 240,000 a month. Which is a lot. That's a lot. Yeah, I mean, we very often discussed the strength in the job market. Now, if that revision is, you know, anywhere near what BLS is saying it may be, we're looking at an average payroll growth over that period of about 175,000 months. So from 242-ish to 175,000.

So that's a big difference. But 175 is still, yeah, 175 is still quite strong. But it does diminish some of that huge gap we were seeing, right, between the payroll survey and the household survey. So it shrinks that a bit. And it shows us that the job market slowed much more from its peak in, you know, 2022 through where it is now. And I should say from March,

where this data ends to now, we just talked about the July employment data a few weeks ago, the average payroll gain has slowed to about 150,000. So it's more in line with that, right? So instead of just looking like it's like kind of dropped off a cliff, it's sort of been this more gradual slowdown over the past year, year and a half. And oh, and the other thing is this is a very large revision, if this is correct. The benchmark revision is usually a tenth of a percentage point of payroll employment. That's been the average since BLS has been doing it. This is going to be 0.5% of payroll employment. So this is quite large in terms of the way revisions go up or down. So why? Why what's going on? Why are we getting such a big revision down downward when it's

typically much smaller. I don't, I don't know why, but I can tell you where, you know, where it's located. So they've given us the breakout by. I'll give you a theory. I'll just give you a theory. Yeah. The theory is that, you know, in typical times when the economy is growing in a relatively steady pace, the revisions are small. But when you're at kind of turning points in the economy, either coming out of recession and the economy is accelerating or in the most recent period when the economy job market are decelerating, that's when you get these bigger revisions because the way the BLS calculates the data can't keep up with the reality of what's going on in the job market.

Does that sound right to you? Yeah. I mean, I think that I haven't looked at this, but the BLS has what they call a birth-death model, right? So they're imputing the number of new firms they think are over. and the number of firms they think are going out of business, that's model-based. And you're right. So when the economy is at a turning point, either up or down, that becomes harder to do because you have a lot more of that churn going on than you would when things are kind of at this steady state. So if we think we're slowing, there might be a lot fewer businesses being formed right now than

their model says, and there might be more going out of business than their model says. So that's typically why these revisions happen. So the biggest, about half, I said it's 818,000, right? About almost half of that revision is going to come from the professional and business services industry. Is that temp help? It's kind of interesting. That's what I'm thinking. We don't have any further industry detail from BLS.

We just have these big high level, but temp help has been falling, has been shrinking. now for years, right? We've noted it. And it is a large, it's a fairly large portion of that industry. So it will be interesting to see where exactly that's coming from. Before you go on there, I just want to complete the other thought. So, you know, this is a benchmark through March of 2024. Obviously, we're really concerned about what's happening right now, right? And this doesn't, this revision doesn't necessarily suggest that job growth is slowing even more than we think now. But it is suggestive of that, right? Yes. Right now, as you said, underlying monthly job growth feels like it's around 150K.

That's with the existing data. After the next year's benchmark revision, we could very well find it's south of, well south of that. Even softer. Yeah, sure. And that would actually be more that would actually be more consistent with what we're seeing with unemployment rising to the degree that it has, right? Because it was hard to square these things. It's, you know, with these revisions. the gaps between household, as you said, household and payroll are closing and, you know, what's going on with job growth compared to unemployment was hard to square, but now it feels like it's more in line, at least, than it was before. Is that fair? Absolutely. It makes a little more, it's a little easier to explain than it was before.

Okay, go ahead. Finish your thought about it. Oh, I was just going to say the other notable, so I said that, you know, half, almost half of this is going to come out of professional business services. And then the other notable thing is just about almost every industry is going to see a downward revision. The only exceptions to that are transportation and warehousing, utilities, and education health care. Government's going to see almost no revision and then an extremely small one in this other services industry. But everything else is going to get revised down, it looks like. To your point about the difficulty in estimating these things during turning points in a recession, you know, one of the places you often see that is in the construction industry

and some of these industries where people move in and out or across industries a lot, and there are a lot of small businesses. So construction is probably going to get revised down by about 50,000 at that point. I wouldn't be surprised if that gets even bigger. That was also kind of a puzzle for us. You know, usually construction is, it's rate-sensitive, higher rates. Yeah.

Less construction fewer jobs. And here we were getting a lot of jobs, and that just felt a little incongruous, and this makes it feel a little less so. Yep. Yeah. And it's an industry that's notorious for the BLS to estimate job growth in

because of this fact that you have a lot of, people moving in and out between industries. There's a lot of, it's mostly made up of small private contractors, very, very small one, two person businesses. So it's a difficult industry to estimate. And so that looks like that will be revised as well. One thing I heard is red or I can't, I don't think I'm making this up whole cloth. I got it from somewhere. I'm not sure where. But the revisions can get revised, meaning the payroll survey data gets benchmarked to the, as you call it, QCEW, quarterly census of employment and wages, the unemployment insurance record data. But that data can also get revised, right? And what could be happening is that with the surge in immigration, many of the immigrants that are coming on payroll, they're showing up in the payroll survey, but they haven't really got it.

and on to the unemployment insurance records yet, so they're not showing up there. But over time, they will as the record keeping catches up. And we'll see that the QCEW wasn't, is actually higher than we think it is. So that, I know this is mind numbing, but bottom line is the downward revision will be a lot smaller. It won't be down 818K. It could be down 3,400K. Does that, that's, that makes some sense to me. Does that, does that, does that, what do you think? Am I stretching it? I don't know. I mean, I've never heard that issue raised before, but it's certainly plausible, right?

And given what we know about the size of the surge in immigration, like that, obviously what you're describing is a phenomenon that must always be happening, but just given what we know about the size of the surge over the past few years, then maybe that moves the needle on this. Yeah. The revisions to the QCEW data are generally in very small, not consequential. but in the current context, because of all the churn in the labor market, due to the immigrants coming into the country and getting work, it could be a lot larger this go around.

Anyway, bottom line, the labor market is strong, but it's cooling, and cooling to a point where it feels like the Federal Reserve should get going here and cut interest rates. Anyone agree, anyone disagree? We want to take the other side of that? I was going to raise a question about that, the counterfactual of, if the Fed had known the correct, we'll say the correct, you know, employment numbers, do you think it would have moved their opinion enough that it would have changed the timing

of this first cut that if they knew the job data wasn't quite as strong as they known, would we have gotten a cut in, you know, August or something earlier? Maybe in July. In July, I think there was a July meeting that might have pushed it up to, they might have cut in July if they had that information. Yeah, I think so. Would they have gone in March or May? Probably not, because they were at that point.

Because inflation was still the-in-lawed. Yeah, that was sort of the beginning of the inflation starting to come down, right? Yeah, yeah. But, I mean, Jay Powell's comments seem to suggest that, yes, they probably would have cut in July if he had known this. I think that's my interpretation of what he said. Where? You mean when you say that? In his Jackson-Hull's speech.

Oh, okay. So let's go there next. Yeah. Let's go to that topic. And I only had a chance to, because we came, this podcast. Our podcast started right after that was, he gave the speech in Jackson Hole and was released on the Fed website. So I haven't had a chance to really dig deep.

Has anyone read that carefully? Chris, did you read it carefully enough to summarize? I quickly read the Wall Street Journal piece. Basically, it comes down to your point that he's suggesting that the time has come to cut rates. That was the message. Oh, I mean, it was point blank. I'm cutting rates.

I mean, like, I've never seen anything. It was like there was no ambiguity here. rates in September. And he alluded to, he said, quote, we do not seek or welcome further cooling in the labor market. The time has come for policy to adjust. So it sounds like now they're very concerned about the labor market. And I'm just saying, really? Now you're telling us that? I mean, for sure we're going to see further weakening in the labor market. For sure, the unemployment rate's going to go higher here and job growth is going to slow. I mean, come on. But Okay.

Finally. Oh, sorry, go ahead. Go ahead. No, go ahead. I was going to say, do you think he subscribes to Inside Economics? I did. Maybe we should. Is he a listener?

Maybe we should be, you know, reaching out and saying, hey, you know, you heard it here first. You heard it here first. Months ago. Once ago. Anyway. But the other, in my reading, I didn't read the Wall Street Journal. I went right to the speech. Transcript.

And I, you know, just as a sidebar, I find reading speeches by Fed officials, particularly on the FOMC, the Federal Open Market Committee, the guys that make the decision on the rate, very useful. You know, they're written in a way that is understandable, approachable, even for laypeople, I think. I mean, but there's a lot of content there. and I find it very useful. And I found this one, again, I read it quickly. I want to go back and read it again. But I found it a good speech, primarily because it is consistent with the way I've been thinking about.

He spoke about why did we suffer high inflation? Why did we suffer high inflation? And he led with COVID. Thank gosh. COVID. The pandemic disrupted supply chains in labor markets. And then he also mentioned the Russian war, which he's dead on. talked about inflation expectations and how they, you know, look like they might become on,

I think he used the word unanchored. All right. He did a little bit about the fiscal policy and stimulus, but that, and it was on the list, you know, that he was kind of metaphorically recounting here in terms of the reasons for inflation, but, you know, it wasn't at the top of the list. It was, I think he led with the pandemic, you know, which absolutely right. That's exactly, you know, what's going on. So I think that he got got that, you know, Exactly right. Chris, have you looked at markets? Do you know what's going on in markets?

How did they react? How have they reacted so far to this? Positively. Stock markets are only up three, 400 points. Oh, okay. What about bond yields? Ten year bond yields? Bon yields, I think we're pretty stable.

I don't know. I guess they fell, 10-year fell about five bases points. Okay. Today, that's, you know, five, ten basis points in a day is par for the course. Yeah. I guess the more interesting one, our statistic that I cracked, was the implied rate cut or the projected size of the rate cut in September. This one keeps moving around. A majority of investors now believe it's 25 basis point cut, but it's a two-third, one-third split between either 25 basis point cut.

So that's down from what it was after that job report, because I think it was. was the majority expected a 50 basis point cut, right? Yes, that's right. That's right. At one point, there was nobody expected, it was zero for 25 basis points. Well, we always had 25 basis points. Right. I'm saying the investor, the, oh, you mean the market expectations.

Market expectations after that report went crazy, right? Yeah. 50-75, right? Now it's back to kind of this more normalized, but still some uncertainty in terms of what it's. What about the, can you tell the, there's another meeting in November, what is the expectation there? So, by no. Yeah, let's see. Because we, in our forecast, we have a quarter point cut in September and then December and then one quarter point cut each quarter going forward until we get down to a three percent rate, funds rate, which is our estimate of the equilibrium rate by 2026.

So are the market or investors thinking what's the probability of a cut in November? It's fairly evenly split that will be down either 50 or 75 basis points by November. Oh, so. So at least another 25. Oh, okay. And there's a substantial portion that thinks either between September or November, there'll be an extra 50. Okay. Okay, so markets are ahead of us.

They think a November cut and we don't have a November cut. Okay, let me ask you, let me ask the group. What do you think? Do you think, would you stick with our expectation of a quarter point in September, a quarter point in December and one each quarter point each quarter of going forward? Or do you think we should have a November cut as well? I mean, I think it's a close call. It was a close call.

Go ahead, Marissa. I was going to say, given our parameters for changing a forecast, right, where we have to be more than confident that there's more than a 50, 60% chance that this is going to happen. Yeah. In my mind, it's like 50-50. I mean, it just is totally going to be data dependent. It's going to depend on what the CPI reports look like and what the job market does over the next

couple months. So I don't think, I don't know, I think it could go easily go either way. They could do a 25 basis point cut at each of those three meetings. They could hold off in November. So what you're saying is, what you're saying is our forecast is, you're saying our forecast is what it is. And for us to change that, we have to have a high level of confidence subjectively. That's two-third probability. And in your mind, that's not high enough. Therefore, don't change the forecast. That's what I'm saying, yes. Yeah. That's what you're saying.

You agree with that, Chris? Yeah, I would. Yeah. What about you, Brendan? I know you're more fiscal policy than monetary policy, but I know you got to view. You got a view on everything. These Canadians, they got you, you are Canadian, aren't you? Brendan is not. Oh, my gosh. This is what happens. No, I was born in Boston, Massachusetts. But I've been covering Canada for like seven years now at Moody's. And over that time, everyone's just like, he's Canadian. Boston, Canada, what's the difference? I'm just saying, come on.

It's north. It's north of you. Yeah. It's north. Okay. All right. Okay. Sorry.

No, no. No, but wait, La Certa is French, isn't it? The Portuguese, actually. Oh, it's okay. Okay. I got it wrong. Close it out. Close enough. Close it. I'm dead wrong on every level. Oh, yeah. Okay. Sorry about that. No worries. I'll say I have the Bank of Canada cutting at about like every other meeting, which is a little faster than you're like once a quarter pace. That means, I think there's some reasons, you know, they're going a little faster. But, you know, heck, they got started cutting in June, which is, you know, roughly when I think the Fed should started cutting. Agreed. And they've come out of the gate with like back to back cuts because as you say,

you know, there's these lags in transmission and, you know, they're seeing some bad retail sales numbers. It looks like consumer spending is really softening up. GDP's flirting with negative territory. I kind of feel like to do this whole rate cycle, you know, Canada's been a little bit of the canary in the coal mine or it's sort of, it always seems like it's sort of a little like six months ahead of like what's going on in like the United States. So yeah, what we see in Canada right now is kind of like,

rates were too high for too long, and now unemployment's getting uncomfortably high. Consumer spending is a little too weak for comfort, and now it looks like the Bank of Canada is going faster than they originally intended. So I could certainly see the Fed saying, like, oh, no, in a few months and picking up the pace. That's interesting comment you just made. Do you think Canada is the canary in the coal mine for the U.S.? Because they're a little more rate sensitive, so I feel like that impact, they got hit with it a little But first where, you know, we have those nice fixed rates in the United States. We've sort of had a little bit of delayed impact on that, you know, debt service strain and stuff.

So I, yeah, I've kind of, it's interesting. I'm sort of seeing this pattern where Canada is sort of, well, the United States is sort of behaving similar to way Canada was, you know, six months back. Okay. Can you just send me an email if you ever feel like the Canary is healing over? Dying. I would like to know that. But, yeah, just send off the alarm bells. So if you, you know, if the canary falls on the ground, you know, that would be good.

Okay. Absolutely. All right. Let's put, I'm going to come back to the election, but let's play the stats game first. We each put forward a statistic. The rest of the group tries to figure it out. And I'm going to preface this by saying I'm wholly unprepared here for this. So if Marissa wins, that's why I just, you know, why.

Oh, yeah, that's why. Right. The rest of the group tries to figure it out with clues. deductive reasoning, questions. Best stats, one that's not so hard. We never get it. One that's not so easy, we get it so quickly. And if it's apropos of the topic at hand.

And I don't know what the topic is exactly. So it can be pretty much anything. Poperie. It's the potpourri. And we always begin with Marissa. By our way, Marissa. Okay. My statistic is four.

Four. I'm not going to tell you the units. You're not going to tell us to the units. Okay. Electoral vote. electoral college votes. No. No. Right.

Is it something, is it something related to an economic release? Yes. They came out this week. That's right. Yep. Why are you laughing, Chris? I don't think she would just, you know, talk about the number of guests she plans to have a dinner tonight. No.

Are you kidding? That is typical. That's exactly what Marissa would do. You are so wrong, my friend. That's exactly, she gives us all these head fakes for, Is it meetings? Four beats? Meetings.

No. Fed meetings. Or meetings. Boy, this is my, this is my, Chris, you need to lead the way here because I am. Months. Months? Yes. Oh, month supply of existing homes.

Yes. Yes. See? Look at that. Wow. That is. Look, Mark. That's how it's done.

He's just saying. Tush. Tushay. That's too much. That's good. Very good. I deserve that. Absolutely.

So what was it again? Four months what? There are, as of the July release of the National Association of Realtors existing home sales, there are four months of supply on the existing home sale market. And I picked it because this has been moving up, right? were at a extremely low point a couple years ago. And now we're above four for the first time since basically before the pandemic. And so, and I believe, what was the low? What was the low?

Okay, we have all this interesting. I think it went down to like one or two months. Yeah, something. Yeah, something. Okay. So four. And what do what, what, remind me, Chris, you know this rule of thumb. What's kind of typical for six, six. So it's still low, but it's moving in the right direction. Yeah, depending on your perspective. Normalizing. Normalizing. Yeah, normalizing.

And isn't it the case, Chris, I thought it was four months where we've never seen house prices drop if supply has been below four months. Is that the pressure? So nationally, I don't think we've ever seen below six, actually. Oh, it's below six. So we're still at the lower end of the range. So very unlikely we'd actually see home price declines, but, you know, it's a different market here.

So I think it's possible you could actually see some declines in certain markets, even with inventory that hasn't fully adjusted back up. Even in our forecast, we have basically of National House price, we have inventories. As mortgage rates come down, as the existing coupon on existing mortgages continues to rise, that gap that has existed that's created this interest, so-called interest rate lock of Bates, got all this demographic need that's being ppped up. Combination of all that causes inventory, people start putting homes on the market, and we have house prices essentially going flat here nationwide, which means half the country's

experiencing price negative numbers, right? So nothing really, yeah, like kind of around zero. So it's, yeah. Well, also everyone's got so much equity built up, given the strong house price, growth. I mean, I think house prices are up 50, believe it or not, 50% since the pandemic hit. I mean, that's just unbelievable. Yeah. Yeah. Okay. Oh, that's a good statistic. Do you know, does the realtors publish, they, do they publish that by region of the country? Do you know, Mercer, did you look and see what's going on regionally at all? I was just curious.

I looked at home sales regionally. I don't know if they have the supply. They don't publish the supply. Do you know, Chris? I thought, I don't. I don't. I don't. I don't. I don't. Maybe it's not for a more or NAR. We calculate it. We calculated. Regionally, down to even a metro level. Yeah, I don't know that the NAR publishes it.

Publishes that. Okay. All right. That was a good statistic. And way to go, Chris. That was masterful. Absolutely. Learn for the best.

There you go. Brendan, you want to go next? Yeah, I actually got two good ones. Actually, I'll go with this. I'm going to, since it's Canada. I'm not going to play by your rules. I'm going to break it a little bit. I'm going to give you.

Is that I'm not going to play by the rules? I'm not going to play by your rules. It'll make sense at a second. He's a guest. He's a guest. These Canadians, they think they can just do what they want to do. Stopped it into Canada. We're not going to play by your rules today.

So I think this will be interesting, though, because I want to bust a meth, which is the truth is. What did you say? Was that Canadian? What he just said? I don't know what he just said. What did you say? I want to break a neck? I'm going to bust.

I'm going to bust a myth. I'm going to bust a myth. Bust a what? Myth. Myth. Myth. Okay. So sorry, Brendan.

Are you okay with all this? I don't. I hope I'm not. I know you have the skin. The Canadian skin. Oh, oh, yeah. Yeah. I don't.

I don't know. Oh, I don't know. I'm sorry. I'm sorry. I got to stop. Someone's, going to get upset at me. Go ahead. Angry emails from Canada.

I know. I know and I love the Canadians. I do. Even that sounded bad. Go ahead. But I wanted to actually, one of the most interesting, because I've been covering Canada for a long time. I was thought this was one of the most interesting stats I ever found was, surprisingly, Canadians are city dwellers.

It's not like the stereotype, you know, a guy wearing flannel, you know, with an axe chopping down trees in the woods, completely wrong. In Canada's three biggest metros, Toronto, Montreal, Vancouver, 36% of the country lives in those three metros. He's breaking all the rules. He's not playing the game at all. Here's the question. You're going to have to competition between the three of you. What share of the U.S. population lives in its top three metros?

Oh, my God. Okay. Let me. You guess the number this time. That's what I'm switching things up. Okay. So we're talking about New York, which is 30 million.

Los Angeles. Which is 10, right? Well, metro divisions or areas? CMA. Central. Oh, bigger area. Oh, bigger areas.

Oh, bigger. Okay. That's why the 30 million, the 30 million. I'd say, I'd say, I'd say, 36% of Canadians live in their three biggest cities. I'd say 15%. Maybe 12, 12, 15%. 12%.

That's my guess. Okay, let me guess. Guessing are you doing the map? Well, I'm both. I mean, I don't, you know, I'm guessing at the math, so. Yeah, I say 12%. Got to do, you guys can't get, well, you guys are going on a calculator now. I'm going on a calculator because I'm going on a calculator because I can't have in my head.

How many Americans are there? 33, 35 million. See, I'm doing the arithmetic for her now. Okay, now. What did you say, Mark? What do you say, Chris? I like the 12, 15%. Yeah.

What do you say, Marissa? I'm saying... You're taking the under. 20%? Oh, you're wrong. You're wrong. What is it? I know.

That seems way too high. Chris, I need a point estimate from you. I said 12. Oh, 12.5. All right. He prices right. It's 13%. Oh, okay.

Oh, my God. Yeah. Chris Lynn. That's how it's done, Mark. That's how it's done. Yeah. No, we'll hold it. You didn't include the immigration that came into the country.

I might be. You got it all. Well, no, that would go the other way, wouldn't it? Yeah, there's probably more immigrants in these cities than there was before. Okay, that's pretty cool. So you're saying 37% of Canadians live in the top three metros is 12, 13% of Americans live in the top three metro areas. And if it gets sort of more, even if you start adding more cities and like you go to like,

top town. It's still like a stark vibe, which is... Right. I was just very impressed. You know, I thought, you know, Canadians like to live in cities. Yeah, yeah. Is there any other broader reason why you brought that up? It's just kind of a fun fact. I wrote down some fun facts about Canada and preparation.

That's a good. That's a good one. Yeah. I like that. Yeah. That should be a board game or something, you know. We'll do one more. Chris, you're up.

All right. It was easy. 1.96%. 1.96%. A statistic that came out this week? Yeah, it's daily. Oh, it's daily? Yeah, well.

Is it an interest rate? It is interest rate. Is it the spread between what? It can't be between the fixed rate and the 10-year treasury yield. No, it cannot. Is that the yield curve, some measure of the yield curve? No. No.

The spread. Related to Chairman Powell's speech. The spread between the funds rate in the two-year or something? No, you're getting close? Closer. The spread between the, is it, I don't know, three months. Expectations. What was that, Chris?

Expectations. expectations. Inflation expectations? Yeah, it's the five-year break-even. Oh, five-year break-evens. Oh, okay. Yep. So the difference between the yield on a five-year treasury bond and a five-year inflation-protected security tips. Ah, which is right down the strike zone, as they say. Right down the strike zone. So it's actually come in, right, since earlier this month. So inflation is off the tape. Right. Investors are no longer obsessed with inflation, right? This suggests that they are. thinking we're on the right path here right expectations remain anchored the good thing allows the Fed to go ahead and take that cut yeah yeah perfect that's a good one that's a good one okay let's I'm just going to move forward because there's I want to I want to talk about the the election a little bit because Brendan does a lot of work uh on this issue and then we'll then we'll end with a couple of listener questions. So Brendan, the election model, what is the model? Can you just very quickly describe the model for folks out there? And, you know, what is it saying now about

who's going to be the next president? Yeah. So in order to set our baseline forecast assumptions, we have to make some, you know, decision about what our assumption is for who's going to be the next president of the United States. We want to make that, you know, as we don't want to be suburbism. objective in our judgment. You know, we want to be as rigorous as possible. So we built a model that predicts the winner of the presidential election. It predicts the winner on a state-by-safe basis. So, you know, we build up that electoral college count. And since we're economists, you know, we largely drive the model with economic factors, but we also control for political factors. In the current version of the model, the primary factors are gasoline prices, inflation,

household incomes, consumer confidence, interest, 30-year mortgage rate. And each month, once we update the baseline forecast, we update the model two, because we're using our projections for October, November, in order to inform the model. So current projections of the election model are that Kamala Harris is going to see. secure a small win. I'll say, you know, one thing that's interesting was, I think for for a long time, the model has projected that Democrats were going to win the presidential election by a narrow margin, which when it was Biden versus Trump, you know, there was, there was a bit of an issue because, you know, the polling said, you know, Trump was doing better than Biden, but our, you know,

model was saying that, you know, Democrats were going to win. So clearly there was some factor that the model wasn't capturing that was explaining, you know, Biden's underperformance. But since Kamala switched to become the candidate, current polling is actually more in line with what our model is predicting. So I'm feeling a little more comfortable about projections over the last month. So I think the current model has Harris winning with 286 electoral votes, I believe, and she needs 270 to win. Right? Is that right? Yes, correct.

Yeah. Okay. That's before this recent announcement that Robert Kennedy is going to drop out of the race, which goes to third party candidacy and turnout, which. are both variables that are in the model. Do you have any sense of whether that changes the – when he's going to drop out and it's reading press reports, he's going to – if he hasn't already done it, he's going to put his support behind former President Trump.

Do you have any sense of whether that changes the dynamics here in a meaningful way? So when we built the model, I think he was – you know, R.K. Jr. was polling closer to, like, 10%. So we thought, you know, oh, this might, you know, be an important. part of what determines the election's outcome. So we put third party vote share in our model as a factor. Since that time, I mean, by like the latest polling I've seen, like his polling average has drifted down down like the 2 to 5 percent range. I don't think the incident with the bear in Central Park should have helped his cause. That seemed to be sort of the final net. Right. So, yeah, the question is he's, he's, he's, Nate Silbury polling average, you know,

say he's got about 4% of the vote. The question is if he drops out and hypothetically there's discussion that he's going to endorse Donald Trump, you know, the question is like how much of his support do we think would swing to Trump? Polling indicates that, you know, if you look at this set of, you know, RFK Jr. voters, they are heavily inclined to split in Trump's favor. I think the question we were debating yesterday was I think I'm a little more of the view that, you know, are these folks, you know, maybe more inclined to, you know, how likely are they still to vote if their preferred candidate isn't on the ballot anymore? Are they more likely to stay home or they more likely to switch and vote for Trump? So let's say, you know, a quarter of them stay home. The rest, you know, split, you know, two thirds for Trump, a third for comma.

Maybe it gives him point to max, two points, maximum, maximum. But, you know, one of the issues is, what does that mean? Two points on one. Like national polls, I'd say, like a percentage point. That's a lot. A percentage point? If he could take like half of Kennedy's support, then he could get it. I don't know.

I mean, I just saw the New York Times. They have a nice little wizard and they show polling, you know, it's kind of a poll. of polls with and without Kennedy and the gap between Harrison and Trump is unchanged in the two. I'll mention this. Even if it moves the national polls, one thing I noticed in my research from building the election model is third party candidates historically do very poorly in battleground states. Third party candidates, they rack up the vote in, you know, Vermont, you know, Oregon, And Alaska, they get sizable shares out in states where it's really like not competitive. And then that kind of makes sense.

You know, like if your state's not competitive, you know, and you want to protest, you like throw your vote to like a third party or something like that. But in battleground states where, you know, the idea is, you know, like your vote counts and you're getting like saturated with ads from the Democrats and Republicans, third parties just they get, you know, they tend to just perform very poorly. So from what I've seen is that the RFK, like in battleground states that we care about, is like even like a smaller potential effect like in Donald Trump's, you know, direction. So I, I really don't think, I don't think it really moves the needle at all like on this election, you know, even if we see

a little bit of something moving the polls national. Well, well, I guess we'll, we'll have to see. we'll see what he drops out and when we rerun the model we'll have to think about what all this means in terms of those assumptions we're making about third party vote and and turnout. But interesting. Okay. Okay, very good. Well, I was going to ask you to talk a little bit about VP Harris's economic proposal, but we're running a bit out of time.

Maybe we can do that in another podcast as we get closer to the election. Let's turn to some of the listener questions. Marissa, you're the keeper of those questions. Do you want to pose one or two or three of those? Yeah, sure. So the first one is about the housing market and homeownership. This comes from Levi, who is a 25-year-old electrician in Missouri. He wants to know, we talk about the homeownership rate, right?

Is there an optimal homeownership rate? If the home ownership rate is 65%, is that good? Is that bad? How does that affect the economy? If at all, does it help to, does it help the economy perform better if people own a home as opposed to rent? How do you think about that? Yeah, I love that question. Yeah, you want to take a crack at it?

Oh, sure. This is a brilliant question. You know, people are debating this all the time. And we can, you can take different angles on it. One is just to look kind of internationally, right? Look at different countries, look at their homeownership rates. And what you find is that you have countries that thrive with high ownership ownership rates, that they also thrive with low ownership rates.

So it's not, there's no magic formula would be my conclusion, right? Germany, for example, has a relatively low homeownership rate, but they've got a very healthy social safety net. They have other ways to invest for retirement, for example, or they have public pensions, what have you. So some of the advantages we ascribe to homeownership in the U.S. are offset by other policies or programs that they have. So you can find all sorts of examples. You can also find countries where the homeownership is very high, but the economy isn't doing that well, right? Where people are, yeah, they're really overinvesting, if you will, in housing because they don't have other productive assets. So my conclusion is that there's no optimal, single optimal homeownership rate.

If we focus on the U.S., we can look at our history, and two-thirds seems to be close to an equilibrium, if you just draw the lines. When we got back, during the housing boom, we pushed that homelessness rate close to 70%. And that's when bad things happened, and then things came back down, right, because of the very aggressive mortgage lending that we did. That's not to say we couldn't get the hom ownership rate back up, but, you know, there is something to be said about how. having a pretty healthy rental population. People need to be mobile. You don't want to lock into a home necessarily. You have to have some of those options here.

So that would be my conclusion. I think the one, in terms of what the ideal should be, the one thing to note is that the homeownership rate is only based on the households, the existing households, right, the ones that have already formed. What fraction are renting, what fraction are owning their own home? What's missing from that calculation, I think this is probably the most important number. are all the shadow households, if you will, right? So there are plenty of young adults, for example, who would want to break out and either rent or buy, but they can't do either.

And they're not really captured by that home ownership rate. So I think we need to be a little bit careful when we study that home ownership rate statistic, that just to place it into context. You could have a high home ownership rate among households, but still have a lot of pent-up demand, if you will, if there's insufficient supply or availability of either rental or properties to buy. What do you think, Mark? Yeah, I know. I thought that was a great response. I don't know that one can identify an optimal home ownership rate.

I will say, though, the homeownership rate has been kind of the benchmark for success with regard to fiscal policy for a long time. You know, going back, many administrations, it's about how to raise homeownership. And despite all the efforts, we're still here at two-thirds. Now, hard to know what the counterfactual would be given, you know, demographic trends. I mean, home ownership rates are a lot higher for white, older households than they are for younger, black and Hispanic households. And as the population shifts, that's going to put downward pressure on the home ownership rate.

So, you know, maybe the homeownership rate would be a lot lower without all the policy support. But as you said, we're kind of two-thirds is in my mind. We're kind of stuck at two-thirds, you know, up or down all around. The thing I'd say is it might be when you think about it cross-country as you were doing, there might be a cultural element to it. And I think the homeownership in the United States is much more central to the way people think about their own economic and financial success. you know, it is part of the American dream. If I can't own my own home, you know, I'm not realizing that dream and that's kind of been inculcated in, I think, people's thinking for

generations. That made, I don't think that's the same kind of thinking in Germany, as you pointed out, the ownership rates are a lot lower. And that goes to a lot of cultural, historical, you know, kind of circumstances. Germany got devastated after World War II. They needed to construct a lot of housing very quickly and it had to be rental. And so they just had a very different perspective on home ownership. And also home ownership requires you taking on a debt, you know, a mortgage, typically a mortgage loan. And different countries, societies have different kind of norms around the use of debt, you know, and whether that's, you should do that or not do that. So there might be a lot of cultural differences where, so that suggests that here.

in the U.S., it's still very central and it's still very important to a lot of Americans, young American households to become homeowners again. And it just raises, it elevates homeownership as an important goal that we're all trying to achieve with better policy. But it's a great question. It's a great question. Okay, you want to take one more? One more.

Okay. It's kind of similar to that one that I just asked. this one's about the personal savings rate. So we typically talk about this. We know it's fallen recently, right? It's quite low right now, but it goes up down. He's asking, is a 3% savings rate? Is that good?

Is it bad? Is it good if it's low? Because it says people are out there spending. But if it's too low, you know, then that might mean that people are in a precarious financial situation. On the other hand, if we see a higher savings rate, if everyone is saving, people aren't spending that in and of itself could cause a recession. So kind of like that homeownership question, is there an optimal personal savings rate that we want to see? And how do you balance that with the rest of the economy? Yeah, that's a really good question.

My sense is that the personal saving rate, well, you know, what's the optimal saving rate varies considerably, you know, over time. And, you know, sometimes it's low, sometimes it's high based on more temporary cyclical factors. And I wouldn't read too much into it. Like right now, for example, you know, like right now, the saving. rate is on the low side, three to four percent. For context pre-pendemic, it was almost double that. But it's on the low side because stock prices are at record highs, housing values are at record highs. People are wealthier, particularly high-income, high-net worth households. They're wealthier.

That's who does the bulk of the saving. And they feel like they don't need to save, right? Because they've got enough for any precautionary reasons that they might need for emergencies. they've got enough to pay for in their retirement. They've got enough to pay for their child's college education. So they don't need to save as much. This is a so-called, you know, that's the so-called wealth effect. So, you know, I don't know that I'd read too much into the saving rate in any given point in time. Over long periods of time through the business cycle, my sense is that a saving rate that's somewhere in aggregate,

that's a personal saving rate that's somewhere between five and, 10% is probably optimal. I mean, I think that would suggest there's enough saving going on across the income distribution that people are, you know, doing, saving appropriately for their future needs. And that's kind of consistent with the historical norms over the last several generations, you know, again, abstracting from the vagaries of the, of the ups and downs and the vagaries of the data, that feels like it's kind of been so-called equilibrium, you know, where it's optimal. The thing I'd say, though, is we may need to see the saving rate rise more than that if we continue to run large budget deficits. This is kind of the recardian – I'll just

some jargon, Ricardian equivalence. You know, if the deficits are rising and our debt load is increasing, you know, we may begin to think, well, will government continue to provide the same level of support historically as it in the future as it has historically while I get the same Social Security benefits while I get the same Medicare and Medicaid benefits, you know, will it be the same support? And if you begin to think, well, maybe not, then you need to save more to offset the lack of saving done by the by the government. You know, you can see this in spades in China. In China, personal saving rates are very high because there isn't much of a social safety net. People are scared that they're not, you know, if they get sick or when they need some kind of emergency,

they have emergency and they need some kind of help, financial help. They're not going to get it from the government, so they're on their own, so they have to save a lot more. So that kind of same psychology may, in reality, it may start to occur here if we don't address our long-term, you know, fiscal issues. But, you know, for the here and now, for the foreseeable future, I think, you know, the long-run historical saving rate is kind of in the somewhere between five and 10 percent. I think that's probably roughly where we should be.

I don't know. Does that, I'll turn it back to you guys. Any comments there? Any thoughts on that? Makes sense. What's the saving rate? Canadian saving rates are lower, right? Brendan?

They borrow. It was going into the pandemic. It was like rock bottom. It was like 0.4 something like. Wow. There was no savings going on free pandemic in Canada. It's since the crisis hit, it's popped back up or around five and a half or so. It's actually been rising the last week.

Okay. Yeah. I mean, the Canadian households are much more indebted than U.S. households in aggregate. Well, there's a lot of people prepaying their mortgages faster so that when they have to, because Canadians have to renew their mortgages every five years at whatever the current market rate is. So what a lot of people are doing right now is because they have that refi coming like two years. You increase the payments right now so you get your principal lower. So when you have to refinance, you're in a better position.

And that's part of what's cutting in consumer spending right now. All right. I think we're going to call it a podcast. I mean, I know we have more listener questions. We'll take up a couple more next week. And folks out there, if you've got questions, fire away. We're definitely going to get to them. Oh, reviews.

If you would like to give a review of the podcast, we'd well, welcome that. You can do that, you know, via your Spotify or Apple or whatever podcast platform you're using. We would appreciate that as well. Anything else, guys, that I should mention before we sign off? Chris, Marissa, Brendan? No? Okay. All right. I thought that was a good podcast. I hope, listener, you enjoyed it as well, and we'll talk to you next week. Take care now.