Moody's Talks - Inside Economics - “Fed” Up with the Jobs Report

Episode Date: January 9, 2026

Jon Hilsenrath, former journalist at the Wall Street Journal, joins the Inside Economics crew to discuss the December jobs report and the Fed. The team breaks down the latest employment data and debates whether the report is “fine” or “anemic”. The focus then shifts to the Fed for a wide-ranging conversation about where interest rates are headed and whether Fed independence is in doubt. Jon argues that independence is already compromised and likely to get worse. Guests: Jon Hilsenrath and Dante DeAntonio, Senior Director of Economic Research, Moody's AnalyticsClick here and here to learn more about Jon HilsenrathHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeRides, Mercedonita D. Natale. Hi, guys. Hi, Mark. Mark, good morning. Good morning. It's Jobs Friday.

This is Friday, January the 9th, and we have Dr. De Antonio with us. Dante, how are you? Good, Mark. How are you doing? Did you hear the last podcast, Dante? When I brought up that a listener got a little annoyed at me for calling you Dr. De Antonio. I know.

I did not. I did not hear that. I said that that's a form of endearment. That's my way of endearing myself to you. Do you feel that way? Do you don't feel like stult? I'm fine with me for no other reason. It annoys my wife whenever anyone calls me Dr. De Antonio.

So I'm good because of that. Let's explore that for just a second, right? No, okay. That would be an interesting discussion. That would be an interesting discussion. But Dante, as everyone knows, joins us for Jobs Friday to help us break down the number And we've got a guest, John Hilslerner. John, hey, good to see you, John.

Hello, Mark. It's great to be here. John and I go decades back. I don't get a doctor or anything. I'm just an old friend. Very old. I don't know how long we've been chatting. You were at the Wall Street Journal for many.

How long were you at your journal, John? Before then, Mark, we've been chatting since you were, since you started regional economics in the early 90s. And I was a Cub Newswire reporter for 19. Ritter financial news. That's right. You were the guy I came to when, like, I knew I was going to get a thoughtful and fast response, which is what you needed, for instance, on Jobs Friday.

Yeah. Yeah. Yeah. And you, so how long, you went from Knight Ritter to the journal? Went to from Night Ritter back to Columbia and then started with the journal in July of 1997 in Hong Kong, the week the Thai Bought crapped out. Oh, wow. I guess good timing, huh? Yeah.

Yeah. The best thing about my career in journalism is I always, by design or luck, ended up in places where bad things were happening and I had a lot of them. We can talk about how I started my job covering the Fed the week Lehman Brothers flew up. No, is that right? Oh, wow. Yeah. Yeah.

Right to start of the financial crisis. You started covering the Fed. Wow. Wow. Wow. And you, would it be fair to say that you, who was the, who was the journal reporter that was, was that followed the Fed before you? Who was that? A long line of dignitaries before they settled on me. Before me, it was Greg. Ipp. Greg. I brilliant guy. And before Greg, Jake Schlesinger and David Wessel and Alan Murray, a lot of like really, really disliked. Oh, I didn't realize all those folks had covered the Fed. Wow. Yeah. And so would it be fair to characterize you as being the Fed whisperer? I mean, you know, when I was covering the Fed, it annoyed me that people said that because I thought it was, you know, I kind of had a haughty view about my job as a journalist.

I thought I kind of demean my job. But now that I've left journalism and I've started my own private advisory business, I'm like, yeah, I was the Fed Whisperer. Yeah, you could say that. Whatever you need to do to build a brand. Would folks on the Fed call you up in an effort to communicate to the marketplace? Were you a vessel for communication? I love that question, Mark, because you're getting right to it. When I talk to people, they usually try to beat around that.

No, it was a complex dance between journalists and the Central Bank. It's the same case, I'm still sure, for my successor, Nick Timrose. No, I did not have a red bat phone that Ben Bernan called to tell me whenever he wanted the market to know he was going to get interested. I actually had to do some reporting to figure that stuff out. Now, having said that, yeah, I mean, reporters do get access to officials and top officials that the average person in the marketplace doesn't get because they know that we reach a wide audience. but they don't just call you up and say, here's what you need to say today. It's a very complex dance, and there's a lot of kind of give and take on both sides. Right.

And I guess a lot of pressure, too, right? You just, I mean, because everyone's listening to the journal and what you're saying about what the Fed's thinking and how it's thinking about things. I mean, that's pressure on many levels. Because, you know, as a reporter, you know that people in the markets, are paying close attention to it, and they're going to interpret and sometimes misinterpret, not only what you say, but what they think about how you got what you said, like this whole question about, you know, did the bat phone ring? But also a pressure internally from editors, you know, who know, A, that people really care about this, but also that, you know, the Wall Street

Journal's brand is really attached closely to its authority on the Fed. So, you know, some of my toughest battles as a reporter were with editors over kind of how far we could go with what we were saying and when to say it. You know, little story. There would be these, you know, kind of moments when I would write about QE, you know, the Fed's going to launch QE2 or QE3, and it would come out late in the day, like 3.30 in the afternoon. And, you know, people in the markets would say, oh, you know, Branky called the journal and, you know, he wants to give the market a goose. And this came straight from the red bat phone. And what usually was going on in those cases was like, I filed the story by nine and then

proceeded for the next six hours to fight with editors about the headline and the lead and the central paragraph. And then by three o'clock, we're like, my God, get the story out already before the market's closed. So, you know, there's a lot that goes on behind the scenes that people don't see. and, you know, there's a lot of work that goes into those things. And sometimes it has to happen within a few minutes, but sometimes it's hours or days. Well, I want to get to the jobs report in just a second, but while we're on the topic,

you know, in that tenure at the Fed, beginning back to the financial crisis, communication strategy at the Fed changed quite a bit, did it not? Yeah. And what did you think of those changes? Are you a fan of the increased communication from the Fed in the way they're communicating? Yeah, so I'll say three things about it. One is, I mean, I think there was kind of a long continuum of change at the Fed. Like Bernanke, I mean, sorry, Greenspan delighted in his ability to kind of obscure an obfuscate.

And, you know, I think he saw that as an advantage in the marketplace, but he also just kind of enjoyed it. But I think over the years, the economics community and the academic community came to see. see that like transparency and clarity of kind of what you're trying to do as a central banker was what was best for the public in the market. So the Fed, including Greenspan, when he started issuing statements when the Fed cut rates, tried to become more transparent over the years. And that accelerated after the financial crisis because the Fed needed to do what they call forward guidance because they wanted to hold interest rates down and telegraph that rates were going to stay low for a long time. So there were many, many iterations of this.

And so that's one. Point two is, you know, do I approve of it? You know, I think sometimes their messaging gets, you know, my point about it is that these are humans, right? So sometimes they get their messages. It just doesn't come out right or they haven't thought it through. There's internal disagreement that's kind of hard to close. verify. Generally speaking, what I have found with almost every Fed person I've met is like they're really like earnest people who do have a mentality of public service. They're not like

some hedge fund guy who's trying to play the market for advantage. I think they're trying to do the right thing and sometimes they get wrong. Third point I'll make is that I think that's in the process that's going to change with new Fed leadership, which we can talk about. You know, I think some of the people that the president is looking at, you know, I think the Fed went too far in these efforts for transparency and telegraphing its reaction function and its outlook. And so I think the messaging is going to become more obscure as we go through the year. Oh, yeah, let's come back to that in the context of how the Fed might react to the jobs day that we're But before, one more last thing.

So you've left the journal a couple years ago now, a couple three years ago? Yeah, so I left the journal in the middle of 23. I guess that makes 2023. It makes me a couple years out. And I'm doing a bunch of things. I'm really loving kind of being my own autonomous actor. I've started doing, I'm a visiting scholar at Duke. I do a survey with them four times a year on the Fed and how it's forecast.

are changing. And I'm also doing a lot of private advisory work and public speaking and stuff like that. I started a firm called Serapinto advisory. Serpipinto was the name of a Portuguese passenger ship from the 1930s that stowed refugee children out of continental Europe and brought them to safety in the United States. One of those refugee kids was my dad. So I named my business after the boat. Oh, very cool. That's great. That's great.

Great name. Great name. Thank you. Okay, so we'll come back. But Dante, you want to give us the nuts and bolts of the report, maybe starting with the payroll numbers and then we can go to the household. Payroll being the survey of businesses and then we can go with the household survey, the survey of households.

But what would you learn? Sure. Headline job growth was 50,000 to end the year. And you may stop me and just say that, hey, you did a great job. but just so everyone knows. You called me the other day. Dr. De Antone,

you did a great job, my friend. Do you remember what you asked me when you called me the other day? You asked me why forecast was, right? And I think you said 49K and I said it should be 50K. Definitely how that conversation went right.

No, you nailed it, buddy. Good, good jobs. Maybe the first time ever in 10 years ago. Yeah. Before revisions. Before revision. Thanks, Chris. Thank you.

Yeah, so headline growth was 50,000. Private sector growth was a little more than. See, this is this, see, I don't, compliment people. That's my problem. You know, so they have to get it any way they can. That's right. I'll just go ahead and self-per. I didn't realize what a tyrannical boss. In the public guy who's a pretty easygoing guy.

Yeah, tyrannical is definitely the word. Sorry, Dante. We'll let you go. We'll let you riff. Go ahead. Private sector payrolls were up 37,000 in December, so a little bit weaker than the headline. If you look at the three-month averages, the total average is distort. by the big shift in government payrolls in October. So the three-month average on total non-farm payroll is actually down 22,000 because we had that big decline in October. If you look just at private sector payrolls, they're averaging 29,000 growth in the fourth quarter

of 2025. You had fairly significant revisions to the last two months, so the combined revision was down 76,000. Most of that was in October when we already had a big decline reported. now the headline number in October is negative 173. Again, basically all of that is in government. So government was down 174 in October. But that did get revised lower.

On the industry side of things for December, the increases came from where you'd expect them to. Healthcare and leisure and hospitality were the two big gainers in December. On the decline side, quite a few industries that have very small declines, but sort of the larger declines were in retail trade, which was down 25,000, construction dropped 11,000, and manufacturing was down 8,000.

So those were the biggest declines on the industry side of things. Hourly earnings rebounded a little bit, so it was very weak in November. Hourly earnings were up 0.3% in December. Year-over-year growth is now back at 3-8, which is basically where it's been for the last couple of years.

It was 4% at the beginning of the year. It's been sort of in that 4% range for most of the last couple of years at this point. hours worked, we're down slightly. So I would say, to me, the payroll survey didn't tell us much that we didn't already know, right? It continues to signal that job growth is pretty weak and that it's concentrated mostly in healthcare and maybe in leisure hospitality, but it didn't give us a whole lot of new information in my mind.

Yeah, just one quick point. I'm curious in your view. If I take a look at job growth this year, last year in 2025, it felt like we came into the year. We were creating, I don't know, 150, 175K per month felt pretty consistent. Liberation Day, April, early April 2025. And after that, the job market just flatlined. There's just been no job growth. I mean, effectively, some months up a little bit, some months down a little bit, but net, net, net.

And this is before all the revisions are in. we got basically nothing. Is that fair? And would you connect the dots back to Liberation Day? I mean, this feels. I can burn one stat to just reinforce that. So 84% of job gains in 2025 happened between January and April. So you got 84% of total job growth in the first four months of the year.

I think you have to make some connection to Liberation Day. I think there's this question of how much of it is supply side issues as well. obviously you've got sort of weakness in labor force growth. I think it's probably a combination of the sort of demand side impact of Liberation Day and the uncertainty that that cause combined with, you know, the weakness in labor force growth, which has resulted in much, much weaker job growth this year. And just to point out, we are going to get so-called benchmark revisions, the annual benchmark revisions to the QCEW, the quarterly census of employment and wages, the full census of employment next month, I believe, right? Yes, that's right. Now, of course, that's a benchmark through March of 2025, but all the data will get revised at that point. So we'll get a better view on what's going on.

Okay. That's right. All right, let's turn to the household survey. What did the household survey say? I mean, in the headline, it seems a little more upbeat, right? The headline was the unemployment rate dropped to 4.4% after it was initially reported at 4.6% last month. Part of that decline was a revision to November's number. So at the end of the year, the household survey, they revised the seasonal adjustment factor.

So that seasonally adjusted unemployment rate for November got revised down from 4-6 to 4-5. And then we got a little bit of a decline there in December down to 4.4% which means unemployment rate hasn't really changed since September. It was 4.4% back in September. It's still up over the year. It was 4% at the beginning of the year. We're ending the year at 4.4%. So definitely still some deterioration there. The reason for the decline in the unemployment rate was partially good, partially bad, right?

some of that was driven by weakness in the labor force, right? So labor force contracted, labor force participation fell. We did also get a reduction in the number of workers who were unemployed and a little bit of a pickup in the number of employed workers in the household survey. So there is some positive story there. But again, I don't think it really tells a very different story than what we've been talking about for the last three or six months or so. And that the labor market has softened, right? It's partially a supply issue. It's partially a demand issues. That's coming through as very weak job growth with an unemployment rate that is sort of holding steady to maybe slightly creeping higher, but not much else.

Someone asked me a question earlier today. If labor force growth had been more typical, and you can define that however you want to define it. But something before the effect of immigration, this change in immigration policies weighed on labor force, what do you think unemployment would be right now? I mean, I think a lot of it depends on what you call typical, right? Because the labor force growth over the last few years before 2025 certainly was much stronger, but I don't think that was typical either. So my guess is if you go back a few years before that, then, you know, labor force growth would be a bit stronger than it's been this year. Maybe that makes the unemployment rate a couple tenths of a point higher than it is now. Okay. I said five. That would be my guess. I said closer to five than four. Yeah, I think a lot of it depends on what you're calling typical, right? If you consider a of course growth from the last couple years or something closer to that, that I think you'd easily be at 5%. Okay. All right.

I always ask this question, and I'll ask it again, what do you think underlying monthly job growth is, you know, abstracting from the vagaries of the data, and what do you think the so-called break-even monthly job growth number is? That's the rate of job growth we need, monthly job growth we need to maintain stable unemployment. So what's the underlying rate of job growth right now? I think it's about 50,000.

You do? You think it's 50K? I do. Maybe a little less. Can I ask your question? Yeah, sure, far away. So, Dr. De Antonio, I noticed that there were a lot of rectangular boxes in this report where the BLS talked about the statistical revision process.

Obviously, that's been in the news for a lot of reasons. I noticed, for instance, that they said they're doing their annual population controls a month later than they usually do. I'm just wondering, does anything look fishy there? Is there anything? Is there any reason for people to say, all right, maybe there's something underneath these numbers that we have to look more carefully at or some reason why they might be distorted? I don't think so.

I mean, there was a couple notes that, as you alluded to, right? One was a note that they had to tweak the methodology a little bit last month because of the gap in October, and they were able to sort of go back to the normal methodology for the household survey calculations and waiting for December. So it was sort of back to normal in terms of the, monthly data, and then the other note was right that they're delaying the population control update for a month. My assumption is just that that's a delay because of the shutdown and sort of the work that needs to happen in order to do those adjustments. And so they're just giving themselves

a little bit of extra time. So I don't read it as anything fishy going on. I think it's just that prolonged impact of the shutdown sort of playing out. So you're saying underlying job growth is 50K, and by the way, I think you're too high, but okay, 50K. And what do you think the break-even job growth is? It's got to be higher, right? Well, yeah, I think it's around the same number. You know, maybe slightly higher, 60K. Oh, really? Okay. All right. Interesting. All right. So bottom line, Dante, how would you characterize the report in terms of what it's saying about the economy? I mean, this report in isolation, I would say. Words wisely, you know, carefully, judiciously. Go ahead. In isolation, I would say this report is

fine in the sense that it doesn't make me feel worse about the labor market than I did before. It doesn't make me feel better, but it doesn't make me feel worse. So I would call it fine. Fine. Yeah. Okay. John, how would you characterize? How do you think about this report? What's your feelings about it? My first reaction was what was the line from the movie Casablanca, nothing to see here. Move along. Just move along. You know, like from the Fed's perspective, I think the 4.5% jobless rate is an important threshold for them. The jobless rate were like convincingly moving above 4.5% I think they would have, you know, they'd have to seriously consider more rate cuts.

I think with a jobless rate going to 4.4%, it strengthens my view that they're not going to do anything again in Powell. term as chairman. I got a lot of other views about kind of what's going on underneath the data, but we can come back to some of that, the structural stuff. Right. Oh, that's interesting. So your sense is they're finished cutting interest rates. Day Powell is under Powell, under Chair Powell. I mean, unless the job market, you know, it pukes over the next few months. So unless inflation convincingly comes down, but I don't think it will. I think inflation is more likely to be 3% this year than 2%, far more likely.

And you said 4.5% is a threshold. Is that because their estimate of full employment is, what, closer to 4? So if you're over 4.5, then that's getting to a place where... It's around, I mean, right now it's a, well, let me see, it's around, I want to say 4-2. I think it's 4-2. That's in the summary of economic projection. So their estimate for the year is that 4.4.

so that it stays under four and a half percent. I think it's just been the psychological benchmark. A lot of them have had in their heads for the last couple of years. Right. For the last year. And it sounds like you feel like the economy's in, if they're not going to be cutting interest rates, it sounds like you're saying the economy's in an okay place. It's not.

No, I don't think the economy's in an okay place. Oh, you don't. Okay. No, no, I think that we can have a long conversation about this, but well that's what we do on this podcast John we have long conversations feel free feel free I'm in the right place you're in the right place yeah fire away yeah I think policy is too easy and we're going to get more inflation that the Fed has promised the public that we were going to get and I you know I think there's just a lot of stimulus

going into the economic and financial system right now, fiscal and monetary. And it's, you know, traditionally that shows up in higher prices of either assets or, you know, consumer goods and services. So I also think, you know, just I'll make one quick point on the breakdown on the sectors that are producing jobs. Health, education, leisure, and hospitality. I think that's a feature of the kind of economy that we live in right now. I've actually done a bunch of work on this.

There's this paradox about technological change. The more tasks that machines can do instead of humans, the more the workplace values human and social interaction. And so we're getting jobs now in places where that kind of require or human social interaction. And I think that's like a feature of where job growth is going to come from. And it's kind of emblematic of how fundamentally technology is changing the economy. So when you ask, is the economy okay?

I think we're in something like the jobless expansion of the late 2000s, where we had pretty good GDP growth, but we weren't producing a lot of work and unemployment was elevated. So, I mean, that's my two cents. Yeah, no, that's interesting because when I said, is the economy okay, I had in my mind the job market and that it might fall apart that the job, that the economy is going to be weaker. And you're not saying that. You're saying it's not okay because there's all kinds of paradoxes.

I think demand is going to be quite robust, you know, until or unless something breaks. but there's all kinds of supply changes happening. And like I'd love to hear your view. I think what that potentially means is that Nehru is moving higher, which, you know, which might explain why we have a four and a half percent unemployment rate when GDP seems to be growing above, you know, what people think is the trend. I think there's a lot of structural change happening right now. Right, right.

Interesting. Well, we'll come back to the Fed, but let me turn to Chris and then to Marissa. What's your take on the job numbers, Chris? I guess in line with Don't. You say the word fine? Don't tell me the word fine. What did I use last week that you really hated? Resilient.

I didn't like the word resilient. Yeah. I'm not going to use resilient. And everyone uses the word resilient. I was reading the Wall Street Journal coverage of today's job numbers and they used the word resilient. I'll say anemic. Anemic.

Okay. I'm on board with that. You're on board with anemic? I'm on board with anemic. Yeah. Yeah, I think the underlying job growth is lower than what Dante is saying in the break-even. Break-even probably around 50, but I think underlying is lower than that, probably closer to 25. So, yeah, I guess, you know, read the job report for what it is.

It's not showing a travesty, but it's certainly not giving me a lot of enthusiasm or a lot of warm feelings about where the labor market is headed. Why even 25K? I'm just curious. I mean, we're going to get revisions. It feels like they're going to be lower. So I guess I'm nitpicking. So zero and 25 a little bit.

Yeah, okay. All right. Between zero and 25? How about that? Okay. All right. Is that one hundredth of a percent of total employment? We get really specific on inside economics.

Yeah, yeah. We're nerds on this, on this. on this. We debate, you know, zero or 25. I mean, actually, it is, you know, zero is a big number. I mean, it's symbolic, right? I mean, Mercer knows if you put a negative sign or a positive sign before a number, it really matters. Inside joke, but a bad one. I apologize. Dante. Dante. We have trouble here sometimes, John, with pluses and minuses. You know, sometimes we get them messed up. But anyway. So, Marissa, what's your view?

How would you characterize the numbers? I don't think it doesn't change my opinion about the job market. I think it's quite weak. I don't think it's fine or resilient. Just, again, the direction of the revisions, right? We got big downward revisions to the prior two months. I think that's going to continue. I think when we get the population control adjustments next month, that'll be really interesting

because recent data from the CBO show, right, the decline in immigration has been extremely sharp over the last year or so. They've even revised lower their estimates of population growth. So it'll be interesting to see how and if that changes any of these numbers. I'll save my statistic for the stats game, but I think it'll hammer home just how narrow the job gains are too, right? I can tell you what you're going to say. say 50.8%, right? The one month diffusion index. John, I'm not going to say that. Now you're not going to say that. No, I wasn't going to use the diffusion index. Oh, you weren't. Okay.

No, I wasn't. But yeah, I mean, I guess my point is just that I don't think it's a great labor market out there. You know, the unemployment rate is low, but I think that's masking a lot of underlying weakness coming from the supply side of the job market. Yeah. Okay. The job market is bad. I don't know how you credit it any other way. Come on. I mean, it's not falling apart.

I mean, we're not, the only thing that's keeping it together is no layoffs, but the job market is pretty bad. We're not creating any jobs. And that's, and I wouldn't be surprised with revision, you know, where we saw some pretty significant job loss in, in 2025. And if you look into the bowels of the report, you know, just almost everything says we got to, it's fragile. I mean, I'm not going to name numbers because I don't want to take anyone in statistics, but everything in the report suggests, you know, a very weak labor market.

And it's not consistent with 4% GDP. It feels like the underlying rate of GDP growth to me is 2%-ish. That's what it is. I mean, because quarter to quarter, it's up or down, depending on trade, mostly on trade patterns and inventories because of the effects of the tariffs. You cut through that volatility, you're a 2%. So if you're at 2% GDP, you're basically close to zero on jobs, right? Because productivity growth is –

Which means all of it is coming from productivity, right. Yeah, maybe a little bit on labor force. If you look at labor force, it's hard to know because the data is all messed up. But, you know, so far this year feels like it's about a half a point, maybe 4, tens of a percent, something like that. But, you know, it feels like it's all productivity growth. And by the way, talking about productivity growth, this is all before AI has any real consequential impact on productivity and jobs, right? And that feels like that's coming. So that's another

reason to be nervous about labor demand as we move into 2026. Anyway, so I'm not sure what the right word is. Anemic, that feels more right than fine, Dante. I don't know if you're being judged on our words today. Are you kidding? That's all we debate here. Every week. That's every week we debate words. But anyway, can I do it in like three or four words? Yeah, absolutely. I would characterize the labor market as in a state of intensifying disruption. Ah, I like that. So the disruption is coming on the supply side with immigration, but also on the demand side with all the technological development. And what that means for households is just a lot of uncertainty about the future, which maybe helps explain why the confidence numbers are so low.

That's a great point. That is a great point. Intensifying disruption. That's how it feels, yeah, for sure. And people know it. They feel it. They can feel that, for sure. Right.

And on top of that, their wages are, you know, potentially aren't going to keep up with inflation, which is my bugaboo. Right. And John, that's why, going back to wages, why I think, you know, even at 4-4, we're above full employment because wage growth continues to decelerate. And that would be consistent with, we've got some. some slack in the labor market. You know, it's not a lot, but, you know, some slack.

Anyway, why don't we do this? Why don't we play the game? Because I'm sure a lot of the numbers are coming from the report and we'll flesh that out. Then we're going to turn right back to the Fed and talk about what does so mean for the Fed here in 2026 and then talk about Fed independence and then we'll call it a podcast. But let's play the game, the stats game. We each put forward a stat. The rest of the group tries to figure that out with clues, questions, deductive reasoning.

the best stat is one that I can get easily. No, it's one that's not so easy that we all get it very quickly, one that's not so hard we never get it. And if it's apropos to the topic at hand, and that's just a guideline. You can pick any stat you want, all the better. We always start with Marissa. We'll start with Marissa.

Marissa, what's your stat? My stat is 97.3%. 97.3%. Marissa, I can like that I know. Yeah, it's the share of private sector gains that came from health care, as my assumption. Yes. Because my staff was very closely related to that. I was going to say that.

I'm just saying. So last year, so 2025, there were 713,000 health care jobs added. There were 733,000 total private sector jobs added. So virtually all the jobs. gains last year came from health care. Amazing. It is. Yeah.

Yeah. Now, there's certainly a structural element to that, right? Yeah. For sure. The aging of the population. I have one theory. I'm just curious what you think of it in terms of health care, and that is people began to anticipate the expiration of the Affordable Care Act health care subsidies.

You know, they have gone up now this year, and the premiums are much higher. and in many cases people can't afford them and they were losing their insurance. So they went and got health coverage, they went and did their health care needs, you know, leading up to this time in an effort to, you know, get insurance. Does that?

Because if you look at Q3 GDP, one of the big revisions in that data was to spending on services, particularly health care services in Q3. And I'm wondering if that's just anticipation that, you know, I might lose my health care coverage. What do you think?

could be i don't i don't think that that necessarily translates to jobs right but but usage of health care right certainly could be makes sense right so john do you see the the level of competition here this is pretty wouldn't you characterize that a pretty high what does the winner get we used to we used to ring a cowbell that was the you know you get a cowbell more cowbell all right hearty handshake more cowbell yeah yeah yeah Or you don't get my derision. That's the other thing. Yeah. I'm going to, I'm going to motion for you guys to bring back the cowbell.

Cal bell. Yeah, we have to bring that back. Well, the reason why we're not using the cowbell anymore is because we went on this new platform called Riverside. And then when you do the Cal Bell, Riverside knocks out the Cal Bell. You can't even hear the Cal Bell. So that's the technology. The microphones actually are noise cancelling. Oh, it's the microphones.

Riverside. Sorry, Riverside. That was a great stat. I hope you don't mind when I steal it and put it on my LinkedIn page and say, I was on this great webcast today. With attribution, of course. I will give you full attribution. John, you want to go next? What's your stat?

Sure. I'm going to give you a number and then, well, I'll just give you a 4.325%. 4.3.3. Is that an unemployment rate? No. Is it in the jobs report? No. Is it an interest rate?

Yes. Ah. It's not the tenure. It's not the tenure, is it? No. Uh, is it as to do with mortgage rates in some way, John? Because of, no. Well, I mean, but not as to the point I'm making.

No. Right. I don't, is it a historical 10 year rate or something? some average of the 10-year? No. No. Is it a treasury yield? It's got nothing to do with the...

Am I allowed to kind of give Hance-along? Yeah, absolutely. It's got nothing to do with the 10-year treasury rate. And it's not a rate that exists that I'm looking at right now. In other words, it's not like a rate in the market that I'm paying attention to. I see. But it is an interest rate. Yes.

Well, I'll give you another hint. It's a historical average. Okay. Is that the average federal fund rate target over the last since the financial crisis? No, longer than that. Close. You're almost there. Oh.

Since Greenspan, since the wake of Paul Volker. No. No, you're, keep going. Keep going back. Keep going? Oh. To the 1950s by World War II? Over the last.

It's the median Fed funds rate over the last 70 years, as far back as the Fed's been tracking this statistic. Oh, interesting. And my, I've been, I was using this number last year because in August when Jay Powell said that, you know, they're going to cut interest rates and that they think rates are moderately restrictive, my counterpoint was, well, actually the Fed funds rate is actually right at its long-term historical median. I'm not doing an average because the 70s kind of, in early 80s, skew that. Yeah. Right. But, you know, like my argument, one of my arguments is I just don't think policy is

restrictive when you kind of, A, look historically and B, when you factor in, you know, the fact that budget deficits are running at 6% of GDP, the long run average there is closer to 2.5%. And, you know, there's all this talk about the Fed's starting QE again. If you look at the Fed's balance sheet, they are way, way, way overweight duration, which Penn Bernanke taught me is a form of monetary stimulus. So I think policy is very accommodative and the stock market seems to affirm my view every day. Now, if you did that average since, let's say, Greenspan became chair, kind of in the modern, what I consider the modern era, that he came in in, I believe, 1987.

Would it still be that high? I think it'd probably be lower, wouldn't? Yeah, let's see. Chris, what do you think it is? Go ahead, Chris, what do you think it is? Since 1987? Oh, uh, I say, I'd say three and a half. I say three and a half.

That's what I said. Oh, you said three and a half? Okay, three and a half. Let's see. Yeah. I'm going to say because of the length of the financial crisis. Yeah. Oh, I'll actually see three.

Three, okay. But I would rather look at the long-term number, the short-term number, because, you know. Only because inflation. I think we've exited the, you know, the era of the long period of disinflation that pre-span presided over. It's 3.1%. 3.1. 3.1. Yeah.

Right. And I only picked that because, and you're right, there's a lot of different things to consider, but inflation and inflation expectations since that time had been lower than prior to that, right? Yeah, we went through a long period of disinflation. And, you know, from my perspective, you know, we're not in that. anymore. We're in something else. And we have these kind of forces. On the one hand, we're de-globalizing, which should be inflationary. On the other hand, we've got technological productivity

boom, which goes in the other direction. But I just, I don't think that, you know, I think the long disinflation that we enjoyed for the last, you know, 30, 40 years is over. And so I think I think the neutral rate is moving back towards this long-term historical norm, which is over 4%. So the nominal equilibrium funds rate is closer to four as opposed to three, which is worth that said. That's the argument I'm positive. You're making, right. Got it. Well, let's do one more stat.

Dante, do you want to go? Or, do you think you have a good one? Who has, you want to let Dante go, Dr. De Antonio? Okay, doctor, what is your, I'm doing everything I can to make your wife upset. Okay, I'll make sure she listens. She's not an avid listener, I'll admit. I'm a nice guy. I'd like to meet you.

Have I met your wife before? No. Probably. Martin, I used to think you were. What did you say, John? I used to think you were. Until you came on this podcast. People have to live like this over again.

Reality. Okay. All right. John, this is the proof of the pudding. Chris, how long have we been working together? 16 years. 17 years. How long have we been working together?

21 years. Dante, how long have we been working together? It's coming up on a decade. Okay, John, come on. I worked for 26 years with people at the Wall Street Journal who have more than hell out of me. It means nothing. It means nothing. I'm going to do what your colleagues won't say.

C-deck and a decent lifestyle, but it comes with trade-offs, right? Okay, touchy, tushy. You got me. You got me. Dante, what's your stat? I'm be careful with my sign here. It's a negative. It's a negative number. Okay. It's a negative number. 147,200. Jobs? Is jobs related? Is it the payroll survey? It's from the payroll survey. And I will give you a hint that it's related to the point that Marissa was making earlier.

What was the point you were making earlier? Job production in the goods producing sector. Not goods producing. Well, that's not the point, though. Could be over some time period. Is it? Government. Government job loss.

Not government. It's in the payroll survey, though. It's payroll survey, yeah. Is it everything outside of health care? Over some time period. Is it everything outside of education? Is it everything outside of education? Since the start of the year.

Since this time last year, since starting 25. No? It's more narrow than that. We talked about. Oh, last month or something. Since April. Since April, yeah. So since April, private sector X health care is down almost 150,000 jobs.

Wow. That's an interesting. All the private sector gains are basically in health care, but really, outside of health care, there was a bunch of gains in January, February, March, April, and then lots of losses. since then. So that's a good stat. So in the last six months, the last half of 2025, if you look at employment X health care and government, so private sector X health care, it's down almost 150K. Yeah, over the last eight months. Wow. That's pretty telling. Yeah. It's a pretty good stat,

don't they? Get back to your Liberation Day point, right? I mean, you don't expect health care to be affected by that necessarily because, you know, the demand is obviously there, but everything else in the private sector clearly has been cool down. I just quickly, I want to point, I had a stat. I just going to say it because I think it's interesting. It was 2.8%. That's the unemployment rate for college educated. I was looking at the increase in unemployment.

And the only group for which unemployment is actually up in any meaningful way is college educated. I mean, if you look at no high school, less than high school, high school, some college, it's not down, but it's not up all that much. It's really all college educated, which I guess doesn't that feel AI related? It feels AI, doesn't it? It feels like it would be. Anyway, let's go back to the Fed.

So, John, you're thinking if the economy continues along like it has, job market remains where it is and GDP's, you know, roughly where it is. We're at the end of the rate cuts at this point. No more rate cuts. No, okay. That's not what I think. Okay. Okay.

I think we're at the end of the Powell rate cuts. But I think that, you know, my expectation is that Kevin Hassett will get the job. Okay. And that Donald Trump's reasoning is going to be that given a choice between the Kevin he knows and the Kevin he doesn't know, he'll take the Kevin he knows and has proven his loyalty test. You're referring to Kevin Warsh. Kevin Warsh being the other Kevin. Yeah. Yeah.

And I think that, you know, it will be, you know, clear. that Kevin, you know, I'm assuming Kevin has to get the job, that, you know, he's going to deliver at least a quarter of a cut, you know, do everything he can to deliver a quarter of a cut in June, possibly push for a half. I think he's going to lean very, we already know this, he's going to lean very heavily into the argument that we're going through a repeat of the late 1990s, productivity driven, boom, that's holding down labor costs. and therefore rates can remain lower than they have in the past. And then so one of the big questions is going to be whether, you know, the kind of internal political dynamics, you know, the battles we're going to see between him and the regional bank presidents and like how aggressively they push back and how aggressively the team Trump pushes back on their pushback.

We saw previews of this November. And then, you know, the other potential guard rail here is what actually happens to inflation because, you know, the administration became, was reminded in November that the American public doesn't like a high cost of living. And, you know, he's, the president is very concerned about losing the house in the midterms, which is why every day he's coming out with, You know, today he said he's authorizing Fannie Mae and Freddie Mac to go out and buy $200 billion to mortgages. You know, he's going to do everything he can, you know, in a scattershot way to get the cost of living numbers to look better by the midterm elections.

So he's kind of pushing in two different directions. On the one hand, you know, I thinks he could just have the Fed cut interest rates. which ought to be inflationary, all else being equal. And on the other hand, he's going to do everything he can to get inflation down. So I think it's an interesting year. My expectation is Fed stays on hold until June. There's a lot of internal jockeying between now and then about who stays and who goes and whether Powell stays on after his chairmanship ends,

whether Chris Waller leaves when he doesn't get the top job, et cetera, et cetera. And then in the second half of the year, we have these battles. about how aggressively the Fed cuts rates. But I think we'll get some unless the bond market pukes or the inflation numbers really start going in the wrong direction. But would a rate cut in June matter at all, really, to the election results? I mean, at that point, the die is pretty much cash. Who's your audience, right?

If you're Kevin Hassett, it matters to your audience. which is Donald Trump. And so, yeah, it matters. You know, but I think what I'm saying is, you know, I think the president is going to demand the lower rate and Hassel will try to give him one out of the shoot. But I think they're good, but I think they're going to be pushing against the,

what I see is upper pressure on inflation. You guys might disagree with me because you might, you could make an argument. Well, the job market is weak. There's slack. Unemployment is rising. And, you know, and therefore, there's not going to be a lot of wage pressure. And the Phillips curve works.

And we won't get a lot of inflation. My counter argument is I think there's like a name. I think Nehru is rising. I think there's a lot of structural change in the job market. So like in my head, I can hold a 3% inflation rate together with a four and a half percent unemployment rate and 2% growth. Because I think the structural change pushing up NARU and a lot of the growth is coming through productivity.

Yeah, our forecast is very different. It's very different. We got three quarter point rate cuts in the first half of the year, one of which is, one in March and then one in June when we see to flip over to the new Fed chair. And then in July, to your point about the pressure from the president. And the logic is kind of what you articulated. The job market is weak. You know, wage growth is decelerating.

Inflation is pretty close to a peak because the tariff passed through is not, you know, maybe got a few more months here have passed through. Then we get to the other side. And then the other thought behind that or logic behind that forecast is that the Fed, the Palf Fed desperately wants to avoid a recession because if there's a recession, you know, I think Powell and the Fed would get blamed for that, very clearly blamed for that, and it would wipe out any semblance of independence that remains, you know, that it would be easier for the president at that point to basically wipe out that, you know,

that independent. So to head that off at the past, this Fed's going to be a little bit more aggressive in lowering rates than otherwise would be the case, given their reaction function. That's kind of the logic behind that, behind our forehands. Yeah. So you get that. Well, to the market.

I think that binds somewhat with, yeah, I mean, I, I mean, I think the Fed might be a little more

bullish on the demand side of the economy. And I think I am. I mean, demand looks pretty robust to me. And, you know, I just,

I think there's so much stimulus in the system that it supports demand. And, And, yeah, and I don't know. I've grown very skeptical about the Phillips curve over my professional life. And, you know, there's also it just, some of this stuff I go on, like, I don't have your models, right? But I've got, I've got feel.

And it feels to me like the late, the early 2000s when we had this jobish recovery. You know, and I was calling people like you, Mark, and saying, like, Why is output growing and companies are still laying off workers? And this is another, I think, part of this story. You know, like when I talk to executives, there's like, I think in their world, when you talk to an executive, there's like the stuff you can't control and the stuff you can't control. And the stuff you can't control is like everything coming out of Washington every day and, you know, and this whole uncertain environment.

And maybe that makes them a little bit cautious. but the stuff you can control is, you know, your budget and your cost structure. And I think a lot of CEOs are looking at AI and all the technology they put in place before AI. You know, it's not just AI. It's, you know, sound recognition, voice recognition, visual, you know, there's so much technology that was happening before AI. And they're saying, all right, we got to, we want to, we got to protect our margins because

the world is uncertain. And we got to do everything we can to protect our margins in this environment because, you know, we don't know what comes next. And so I think they're in a mode of squeeze it. Like last year it was like job market, labor market hoarding. Now I think it's labor market trimming. I think they're like, they're squeezing, but they don't want to squeeze so hard that, you know, they got to throw out the lemon. So I haven't looked today. Chris, have you looked today? What is the market saying about, are they sticking to two rate cuts, two quarter point rate cuts in 2026? Is that what the markets are saying?

That's right. Very similar to what John described. So no change until through March, right? Through the Powell term. And then there's a cut in June and then kind of one more cut implied by the end of year. Really? There's no cuts between now and June in the markets? June is very low probability.

Really? I'll pull up March. It's a 69% chance. in March? That seems high. That's over 50%. 69% chance that rates are unchanged through March. What's the probability? I'm sorry? So 30% chance of a cut in March. 30% cut. Oh, really?

That long. Oh, by March. And then by June, what is it? So one 47% chance. Well, I got to integrate. So yeah, 75% chance. By June. by you. Okay. All right. Interesting. It kind of lines up with John's description. I would like to hear your view about the long-term rates and where you think they're going. Like you could tell two very different stories about long-term rates. One is this kind of slowdown, weak job market, cyclical story, which supports lower rates. The other is like my story that there's a lot of stimulus, it's

inflationary and that long-term rate should be rising. What do you think, where do you think long-term rates go? Well, 10-year treasure yield is our benchmark. I think they're right where they need to be or should be. They're in equilibrium. In the long run, abstracting from the ups and downs in the business cycle and near-term forces, the 10 years should equal the nominal potential growth rate of the economy. So that's somewhere between 4 and 4.5%. So it's exactly where it should be. And you've got a countervailing forces on either side. The weakening economy would suggest maybe lower rates, but we've got a lot of debt issuance and there are a lot of fiscal concerns and safe haven issues and Fed independence, which argues for higher rates. So the net of all that is we've got

the 10-year yields sustaining between 4 and 4.5% throughout the year. The yield curve becomes more positively and normally sloped. So, you know, we get the funds rate down back to 3. The 10-year at 4 to 4.5, that's 100, 150 basis point spread. That's. kind of the typical, you know, historically, since the Greenspan, the modern era, that is kind of the typical kind of spread. That's, that's our, that's our forecast. I will, I would say, though, what is, what was nominal growth in the third quarter from a year ago? Wasn't it in a class? Well, I'm, I say, abstracting from the vagaries of the business cycle. So abstracting from, you know, the ups and downs, but the underlying rate of growth, potential growth is about, I think,

about it's 2% inflation to 2, 1⁄2% real growth drill. They could shoot a 4 to 4.5%. That's kind of the logic behind it. But I think there is a risk that the bond market, I think you said, throws up. I think that's a real possibility, particularly if, you know, the president and the next Fed chair pushed too hard on lower interest rates. And, you know, it becomes obvious, clearly obvious that it's political and not based on good policy and could lead to the kind of scenario that you're articulating with the inflation

accelerating, then I think the bond market could puke and we could see, you know, spike in interest rates. In fact, I think that is ultimately the real governor on whoever is the Fed chair and whoever, however the Fed, you know, manages itself going forward. And I think the president has shown that he's willing to be guided by the markets. I mean, when you go back to Liberation Day and the bond market look like. like it was falling apart, he pulled back in response. So I think that is a real governor on the ability to capture the Fed, but he's going to, they're going to try.

I totally agree. I call it, you know, I never like this idea of a taco trade. Trump always checks out. I call it market tolerance testing. MTT. You know, like when the market pushes back on him, then they'll back off. And if the market doesn't, then he goes tall hog. But Mark, I want to throw another statistic.

at you. You know, talk about nominal GDP, you know, abstracting through the cycle. Nominal GDP in Q3 was 5.3% from a year ago. Actually, 5.4%. So I would argue, you know, that's more evidence to me that there's too much stimulus in the system and that, you know, I think 10-year yields are going to go up. Are going to go up? Oh, okay.

Yeah, nominal GDP is like, you know, so real GDP is in the mid-two, you know, is kind of, is like, what, two, three? And nominal GDP is five-four. Right. That's, you know, unless inflation comes down, there's a lot of faith, I think, in the system that inflation is coming down. Yeah. And I don't have. You don't have that, yeah. Can I ask, though, because we are running a short of time going back to Fed Independence,

there's a couple events that will be key here. think, and I'm just curious how you think they're going to play out. One is the Lisa Cook case that goes to Lisa Cook's on the FMC. She's been charged with mortgage fraud. The president used that to fire her. She said, no, you can't do that. So this is now in front of the Supreme Court. They're going to decide, you know, under what conditions the president can or cannot fire a fed official. Do you have a perspective on that? It seems like that's a big deal one way or the other. Yeah, my my sense is that the Supreme is that the Supreme Court's going to throw that one away. Okay.

At least a cook keeps her job. And I frankly, I think one of the big questions for the year, in fact, I think the tariff case is up today is to what extent the Supreme Court starts drawing some circles around the president's authorities. But I don't think that I don't think they're going to. they're going to get that one. Okay. And the other, you actually mentioned it. I'm just curious. What do you think the eyes are that Powell stays on the Fed? Because his term continues on, even though he no longer is chair. That would be very... I think the most interesting stuff happening at the Fed, you know, between now and March, is this stuff that we can't see and we're only going to read about in, you know, in a few years, which, one of which is, what are

you know, what are Powell's terms of departure, right? So, you know, last year he said, I'm not even thinking about that. You know, I just want to hand the economy off in good shape, as you said, but before I leave. But all right, we're getting closer to June and it's time to start having some conversations with people. He meets with Bessent Weekly. And I think, you know, what he's, what Powell's actually been doing is playing that card close to his vest. And, you know, he could stay on, for instance, through the midterm elections to keep that fourth vote out of Trump's hands or he could leave. And I think, you know, and so that's leverage that he has.

And, you know, that he'll be having very interesting conversations with Bessent about, like, all right, so I'll leave under these terms, under these conditions. You know, I think his goal would be to try to protect the regional banks and the integrity of the system. But I think that's a conversation that they got through 25 and now there'll be some interesting. I'd love to be in the room for those. And then another wild card that I've always been fascinated by is Chris Waller. If Chris Waller, another Fed governor, doesn't get the job. you know, I think there's a reasonable chance that he leaves.

And so that's another opening. I think there's going to be a lot of kind of tumult about the structure of the board this year and also a lot of pushback from the Trump crowd against the regional bank presidents who might resist. And we saw, we saw indicate. of this in, you know, in the November to December intermeeting period of all of this last year. By the way, the other thing we saw, Scott Besson say this increases my conviction that the Fed has a new short-term inflation target. Their long-term inflation target is 2%. The short-term target is 2.5%. Besson said that he thinks that it's silly that they have a point target. It should be a ban

of one and a half to two and a half or one to three percent. And I think what that means for Kevin Hassett is it's two and a half three percent. You want to be somewhere in that range. Right. And you talk about governors. Yeah. I think that I just don't see inflation getting under two and a half percent because the closer it gets, the more impulse the new Fed is going to have to push the economy to run it even

hotter. Well, I mean, I, if you take that. to its logical conclusion, then you're right about the long-term interest rates, right? Because inflation expectations embedded in the 10 years, not two and a half to three. It's two. And this becomes, in my mind, Kevin Hassett's new, you know, the Fed, we've been talking about core PCE inflation for decades. Yeah, right. I think that I think he starts, you're going to see him talking a lot about long-term inflation expectations and keeping them stable. And as long as they're stable, I think he'll feel comfortable pushing rates as low as he can.

Interesting. Interesting. So, John, finally, just bringing it all together, how much should we be worried about Fed independence, the loss of independence, and, you know, the implications of that? Do you think it's a big deal or are not so much? You do. Okay. Yeah. Yeah. I mean, I think the Fed's independence is already compromised. It already is, yes. I mean, it's like clearly. I mean, But there's been no reaction. There's no reaction in markets. Equity markets up, bond yields are down. I mean, it's not like there's any ostensible concern about that. The biggest surprise to me about 2025, the part that I was most wrong about was the inertia in the markets about kind of everything that's happening

here in Washington and the willingness to not believe it until you see it. But we're already seeing political calculations in how the Treasury Secretary talks about the Fed in the nomination process. And frankly, in Fed dynamics itself, like, why were regional Fed Bank presidents so outspoken going into the December meeting about the reservations about cutting interest rates one last? last time. I think, you know, one factor was that they were concerned that they were, that, that they were being bullied. And they didn't. And there's, and we're going to see more of all of that. I'm going to guess this year. Oh, here's another example. Why did the Fed can, you know,

so they have to re-up all the regional bank presidents before March. That's a process that usually happens in February and it's pro forma. They just did it in December in advance. And so like we're already seeing all of these, you know, some subtle and some very not subtle examples of, you know, the fed's, you know, the comfort that the Fed could act had internally that it could act independently since Bob Rubin in 1994. Like that's just, that's not the world they live in anymore. you know, whether they behave independently is going to depend a lot on who the president chooses and whether the Senate confirms that person and who comes after that, you know, who else makes up the board. But I don't see any indication that, you know, that the Fed's independence hasn't already

shifted. So just so I make sure I have it right, the Fed independence is already being impaired to some degree. It's a question to what degree going forward. And that ultimately that does mean higher inflation, that inflation is not going to be two. It's going to be something closer to three. And that has implications for long-term interest rates.

That, you know, they'll be higher than they are right now. That's kind of sort of what you're saying. So Fed independence matters. Mark, I know you're a stickler for, words and you give you colleagues a hard time they use words that you don't like. Yeah. So I will say the feds, I would say that the fed's independence is already compromised. Compromise.

Instead of impaired, you're saying. Perid, impaired. Impaired is a, it's a little more aggressive than I'm saying. Okay, okay. Okay. But I know, and I would say inflation is, uh, yeah, I think, I think, you know, when we talk about the inflation target now, like in my mind. we got to talk about a short-term target and the long-term target. I think the long-term target,

they say, remains 2%. But I think we're moving into a world where the short-term objective is two and a half to three. And then, of course, and what the bond market has to start worrying about and hasn't is whether, you know, we have enough a succession of short-term that it becomes the long-term that we're living with. And I don't think the bond market is pricing that. One more question. So, okay. So in the kind of scenario you've constructed, at least my interpretation of it, bond yields go up. Do you think there's a possibility? And that could be a problem for the economy, right?

Obviously, you could argue that long-term rates are more important than the federal funds rate with regard to what it means for economic activity, jobs and everything else. Do you think the Fed would then engage, re-engage in purchasing bonds? I don't want to use the word QE because it's not QE. It's a monetization of the debt. It's financial repression. Do you think that's a real possibility in the kind of the world you're thinking about in the future? I think the more likely scenario is that the Treasury does it by reducing its issuance at the long end or trying to reduce its issue and set the long end, tens and thirties.

I think the Fed gets sucked into that game. If there's some real disruption in treasury markets, like a liquidity kind of event that pushes up long-term yields. And by the way, I'm concerned about that as a risk too. Because there's so many very large unregulated players playing basis trades right now. Right. that it seems to me that there's a real risk of disruption there that drives the Fed, you know, to start putting some of that stuff back on its balance sheet.

And then maybe that creeps into, you know, some kind of monetization. Right. You know, and I think what we've seen with this president is that, you know, he's comfortable with a China-like state control type model of economic governance. And so I think he'll do whatever he can. So, but I think it starts with Treasury. You know, in terms of QE or whatever you want to call it, you know, Kevin Worse has talked a lot about how he wants to get out of the balance sheet business. I don't think I'll end up being the Fed chair, but, you know, I think that the Trump crowd likes to talk about getting the Fed out of the balance sheet business.

And, you know, and they'll blame the balance sheet, obviously, on Joe Biden. Well, you know the weird thing about that, John, is what the president announced yesterday, buying a mortgage, half-n-May and Freddie Mac, go buy MBS. What is that? That is monetary policy, straight up, right? I'm going to go buy bonds. If the fiscal authorities taking it over, which is what I'm saying, I think, is more likely to have. Oh, so it's just a fit.

The Fed shouldn't be doing that. Right. So we'll do it. So we'll do it. But then, but that makes, that's where everything comes down to, like, so what is the interest rate that the Fed chooses, right? So if they do this kind of operation twist through the Treasury, you know,

that should put upward pressure on the short end of the curve. It should put upward pressure on the Fed, you know, if it's stimulating by other means to raise the short term. So, yeah, I mean, I think it's, I think we're in a very messy, disruptive time. But kind of really, really, real long view, I think we went through a period of globalization and trade opening that was associated with the end of the Cold War.

And I think it was disinflationary. And broadly, we enjoyed it as a nation. Consumers got cheap stuff. We got cheap credit. But, you know, the American people have rejected that order with the choices that we have made. And I think we're in something different. And I think there's something different is, you know, not disinflationary.

And if it's not disinflationary, it should, you know, and, yeah, so I think that whole sectoral stagnation, disinflation, all that stuff, I think it's over. I also think there's a lot of demand for capital right now, you know, in technology and also obviously fiscal globally. So I think that pushes up equilibrium interest rates. Well, we can go on and on, but thank you, you know, we've already took, and taking a lot of your time. I really appreciate that. And a great conversation. And I like even the pushback on the words. Compromise is a better word. I agree with you. I think that's

a better word that has been compromised. And Dante and Marissa, I just, I want to say it up front. I'm going to steal your numbers and credit you for them. When I say, when I go online and say, what a great time I had on your show. Fantastic. And John, hopefully you'll come back and we'll pressure test your, uh, your forecast like, just like, I always love these conversations with you, Mark. So, uh, and now, now I enjoy that. Now I know where, now I know where you're getting your good ideas from. Exactly. Exactly. You nailed it. Well, with that, dear listener, uh, I, and Chris, Marissa, Dante, anything, Dr. De Antonio, anything before we call it a podcast? No, okay. So with that, dear listener, we are going to call this a podcast. Talk to you next week. Take care now.