Moody's Talks - Inside Economics - Immigration Innovation with Adam Ozimek

Episode Date: February 28, 2025

Adam Ozimek, Chief Economist at the Economic Innovation Group, joins the podcast to discuss his latest proposal to reform and replace the high-skilled immigration program in the U.S. (better known as H-1B). In addition to immigration policy, the group discusses remote work, the softening of recent economic data, and the prospects for the year ahead. Finally, the group goes around the horn with its recession probability for the next 12 months.Guest: Adam Ozimek – Chief Economist of the Economic Innovation GroupAdam Ozimek's research on high skilled immigration: https://eig.org/exceptional-by-design%20/Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X', BlueSky or LinkedIn @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn  Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeReediez and Marissa Dina Talley. Hi, guys. Hi, Mark. This feels like a daily event, this podcast thing. What's going on?

You were just on yesterday. Yeah, that was a good one, wasn't it? That was a great one, yeah. We had John Carney of Breitbart on, boy, the Trump whisperer. It was actually quite interesting. Absolutely. Would you agree? We didn't have chance to,

We typically do the podcast. The guest leaves because, you know, we, we have to come up with a title, which is very painful process to come up with the most painful thing we do for this podcast. And we don't want to put the guests through that torture. And then we kind of talk about the podcast a little bit. And we didn't have a chance yesterday. I had to run off. So what did you think?

I thought it was, I really thought it was pretty interesting, pretty cool conversation. No? It was. I think it was too short. We need to part two. Really? Yeah. There was a lot more to unpack.

Oh, we're going to have them back, though. We're going to have part two. Yeah. That's what we mean. Part two. Yeah. It was good to get that perspective. We don't often get that perspective.

So it was really good to hear it. You mean kind of the conservative? Yes. From the Trump administration. Yeah. Yeah. Yeah. And he did a good job at explaining it.

So good. Oh, yeah. I thought it was a wonderful conversation and good. And it was also good timing, right? Because we had Robert Reich. the former Labor Secretary under Clinton, who's a very strong, liberal, progressive voice, I should say,

and on before. And he was great too. I thought he was fantastic. Yeah. Absolutely. Yeah, two good podcasts. A lot going on on on the economic front. But before we kind of dive in here, let me bring in our guest, Adam Ozemeck. Adam, how are you? Great Mark. Always glad to be here. See you guys again.

Yeah. And Adam is the chief economist at the Economic Innovation I got that right Economic Innovation Group right yeah EIG I keep saying EIG and before but the real claim to fame in my my eyes

is we used to work together you were Moody's for a number of, how long were you at Moody's? Five years. Five years yeah we did some really good work some classics great stuff I you know I'm very proud of a lot of the stuff we did there

Yeah, on productivity growth and aging. I remember that one. It's still underappreciated, very underappreciated paper, I think. Totally. Totally underappreciated. Yeah, maybe we should try to update that, you know, get the data and try to update and re-release and take it on the crack at it. You know, we had to, we used ADP data at the time. Yeah, right, right.

Yeah, maybe we can, I'll knock on Neela Richardson's door and ask her if she'd be willing to fork over that data. You should. Yeah. should try to publish it this time because that's the way I agree I agree I agree and how long have you been at EIG uh three years three years three years and a lot of good work there and we're going to dive into that because you did a study on immigration and immigration policy and obviously that's top of mind in the context of current economic policy being made in Washington and I thought it was great great paper I will admit it was a lengthy paper. So I did use Notebook L.M to help out. And not to plug another podcast,

but that damn notebook LM has pretty good, they turned it into pretty good podcasts. Can't argue with that. Yeah. And pretty compelling, I guess they're bots speaking. I don't know. Oh, this is the podcast where it's all AI generated that you're talking. It's AI generated. I haven't listened to it yet, but I've heard about it. You know, the one thing I would, do you use No. notebook L.M. Adam, do you use it? I have. I have before. I don't use it regularly. You don't use it regularly. One thing I wonder about is I do generate a podcast every time I use it. And sometimes a podcast are like 10 minutes. Yours was 30 minutes. I think that's the longest podcast generated so far, at least in my limited experience. And I don't know if there's any correlation between

what the AI values and the length of the podcast or you know why is 110 one 130 i don't know let's assume it's correlated with quality quality quality yeah absolutely and i just to point out you're also the very you go all the way back to the first i think was the first guest we had on this podcast back nearly four years ago you were the first we had and as i recall at that time the burning issue was remote work. And you had been doing a lot of good work on trying to understand the consequences, the economic consequences of remote work. And you were a, correct me if I'm wrong, this is four years ago, but you were a strong proponent of remote work thinking that it would help to enhance labor productivity. Do you would here four years later, a lot has transpired.

The sentiment around remote work has kind of shifted back to you got to be in the office kind of thing. What's your sense of things now, have you, if you've been following it, what do you think the, have your views shifted in any way? Yeah, it's, it's important not to confuse the data for the vibes on this one because, you know, the CPS now measures it every month. They measure remote work. It's the, you know, it's part of the household survey. And it hasn't gone down over the last few years. If anything, it's moving up. You've got full time around remote workers around 11%. and hybrid remote work is around 12%. And those have moved up maybe a percentage point or so each over the last two years.

So like there's no sign of this mass return to office in the best data that we have. And, you know, I think those are pretty substantial numbers. You know, you hear I was on a panel a year or two ago about place-based economic stuff. And then all day everyone's talking, manufacturing this, manufacturing that, manufacturing this, manufacturing that. And then one of the panelists was like, you know, remote work, it's really a marginal, a marginal thing. It doesn't really affect that many workers. I had to tell her, but there are as many full-time remote workers as there are manufacturing workers in this country at this point. So like, this is not a marginal phenomenon. It is a major economic phenomenon. And then

that doesn't even include the hybrid, which are, you know, another 10 to 12 percent on top of that. So it doesn't seem to be going anywhere. And I think that speaks to the productivity effects and the amenity value that workers place on it. Yeah. So 11% of the workforce, this is from the current population survey, the household survey, is fully remote work. And I think that's higher than the share of jobs that are in manufacturing, I think, at this point. Or maybe it's close. I think it's pretty close. Yeah. Pretty close. About 10% manufacturing. Have you seen any good recent research trying to measure the productivity impacts? I mean, I've seen studies on both sides of this. It's, lifting growth, restraining growth, had no impact.

Is there kind of a meta, you have a meta perspective on the productivity impacts? I do. So almost every time that you dig into one of these negative productivity result papers, what you find is a pre-existing sort of firm market failure, right? You have a pre-existing problem. So Emma Harrington, Natalie Manuel, great economist, had this great study looking at a a company that had a bunch of office buildings and workers scattered throughout the office buildings. And some people worked alongside their teams pre-pandemic and some people worked in different buildings

pre-pandemic. And so the pandemic happens. Everyone goes remote. And now you have this exogenous source of relative increase in remoteness. And so it's a great study. It's really well identified. And they found a decline in productivity. But the reason that they found a decline in productivity was because when you put a senior worker and a junior worker near each other pre-pandemic, the senior worker would help the junior worker improve. Okay. And post-pandemic, that doesn't happen. And they investigated at the firm, why does it happen?

And there's no, this, for the senior worker, it actually would hold back their productivity pre-pandemic to help the junior worker. So after the pandemic, they go remote. The senior workers get a little bit better, the junior workers get a little bit worse. the net impact is negative. But like, what does that tell you about the firm? The senior workers have no incentive at the firm to mentor. It's just that so happens when you place people next to each other.

They do that sort of mentoring informally. Just to be nice. And so like, I see this and I say, okay. I do that all the time with these guys. Remotly. Remotly. But like this is a firm failure. they're on their own, totally. They're totally on their own. No spillovers. No spillovers.

But like that's a firm failure, right? Pre-pandemic. Wait, you had these people doing something that was literally so important to their jobs, it was holding back their own productivity. It was costing them. And they see these people, their pay goes up afterwards because the senior people, they're working hard and their pay goes up. So it's pretty substantial impacts. And it's, it's a, it's a, it's a managerial failure that should have been fixed beforehand. And so I think you're observing these kind of stresses and tenses where things that are really imperfect become stressed by remote work. And in the long run, these are things we'll figure out, right? Like, okay, we need a more explicit compensation for managers to be mentoring. It should be part

of their like quarterly reviews. They should be, we should keep track of it. We should, you see similar things with knowledge spillovers as well. In office, a lot of knowledge spillovers are sort of occur like informally. Oh, you need to know this. Go talk to that person. Oh, go see this person. I think they were here for that project. You know, I don't remember who is here then.

Go talk to this person. They've been at the company. That's so crazy informal, right? Like, that shouldn't be the case. And so I think that firms are going to adapt their management practices to be more formalized in terms of these sort of spillovers. And that is going to be productivity enhancing

when they actually do the work to do it. Like, it shouldn't be the case that like you need to walk around the office. tapping on people's shoulders to find out who worked on a project and what did they know about it, right? Like we should be like formalizing this information sharing. Yeah, totally. That makes total sense to me. And I can see it in our own business.

I mean, we now intentionally design research projects so that we allow for senior people to work with junior people across the globe. you know, and obviously you couldn't do that in person. There's just no way someone sitting in Pennsylvania is going to be able to work with someone in Prague or in Sydney or in Singapore, but we can do that remotely. And that way, you know, I think it improves the product that we're producing, the research that we're trying to achieve, the research results we're trying to achieve, but also accomplishes that mentoring aspect of, you know, what needs to be. be done to make sure that the future is also sound, you know, that it's not only about today's

productivity, it's about future productivity growth. But I think you're absolutely right. We're all adapted. We have to adapt to this, you know, adapt to it. But, you know, we didn't actually come on and talk about work, although we certainly could talk about it, you know, but I do want to go back to immigration. But before we do, you're also a great economist. And there's a lot going on in the economy.

And we've got a lot of data this week. And, I'm going to put you on the spot. anything you want to call out in the data. I mean, we got GDP. We got initial claims for unemployment insurance. We got consumption spending, PCE deflator, consumer expenditure, home sales. It was a big week. And the big story behind it, I think.

But let me turn it over to you. You want to give us a rundown? Yeah, there's a lot every day. We got this morning we got spending data. real spending fell half a percent month over month, which is a consumer spending, right, which was quite a large decline. The same time we got personal income, nominal personal income, which rose almost a full percentage point over the month. So we have strong income data, but decline in spending. Nominal spending fell. So it's not just an inflation effect. Nominal spending fell and we got stronger inflation over the month. The PCE deflator came out, as you said. This is the Fed's preferred measure of inflation. That was in line with what we were expecting, given what we saw already on CPI and PPI. So that rose 0.3 percentage points over the month, 0.3% over the month. Same with core, same measure with

4.3. The year over year ticked a little bit lower because of the base effect from the comparison of last year. So we're looking at 2.5% year over year now on PCE growth. And 2.4.4 on core PCE. So still half a percentage point above where the Fed wants to see it. We got the second read on fourth quarter GDP. There wasn't a revision to that. So that GDP figure holds from where it was previously reported. That's 2.3% annualized in the fourth quarter. Just a couple other things that sort of interested me. Jobless claims came out yesterday on Thursday. we've been, this is something we're watching because, of course, all the layoffs at the federal government, perhaps, right? Some of this is tied up in court now. So it's kind of a little bit

difficult to get a gauge on how many people are actually losing jobs. But jobless claims did rise. They rose by 22,000 over the week. But none of that really looks like it's related to Doge or federal layoffs. That looks like all to be in the private sector and states where, it wouldn't be intuitive that you'd see things directly tied to the federal government. Claims are still low at $242,000 a week. Nothing to worry about yet, but it was a bigger pop than we've seen in claims week over week. I don't make too much of that yet. That said, I won't be surprised to see this rising, you know, as we move through the next few months.

And then I guess we got a lot of housing data, too, So we got some measures on house prices. We got new home sales, mortgage applications, pending home sales, other than prices, all very weak, right? So price growth is still looking like somewhere in the realm of four and a half percent. Nationally, however, you measure it year over year, but home sales fell, pending home sales fell, mortgage applications fell. So housing market looking really weak in terms of just, you know, sales transactions. Yeah. Does I miss anything else?

Oh, did we talk about the conference board yet? No. Yeah. Yeah, that happened when or earlier this week, I guess. Tuesday. Yeah, and Mark, you sent a email pointing this out to some of us. were very worried by this. So the conference board- Well, Flare went off with that report in my mind. Yeah, the survey of, the conference

boards survey of consumer sentiment. Confidence. Quite a bit. It is quite low. I mean, it's like now it's kind of post-pandemic low again. And this was a, you know, month over month, pretty sharp decline. So the overall index went from 105 to 98 over the month. And most of the month. and most of it was expectations about the future, like over the course of the next year. And there's also, you know, this just like University of Michigan conference boards asks about inflation expectations, what consumers expect the rate of inflation to be a year from

now. That jumped from 5.2% to 6% over the month from January to February. So I didn't catch the, in that report, I often look at the so-called laborer I guess it's labor market differential. Jobs easy versus hard to get. Did you look at that? I did. I mean, that actually narrowed a bit.

So on the jobs front, there wasn't people thinking jobs are plentiful, kind of stayed the same. People thinking jobs are hard to get rose a tiny bit. But if you look at the last few months, it's not out of range where it's been in the last four months. So nothing, people don't seem to be that worried specifically about the labor market. it seems to be more inflation-based worries going forward. Okay, so Blizzard has stuff added all up, what's it say about the economy in early 2025? I mean, I think it looks shakier, but I don't think, I'm not, you know, the hard data is still okay.

It's more sort of this soft, Adam, as you call it, vibe data, stuff from consumer confidence surveys, inflation expectations. Right. Looking at the stock and the bond markets have looked a bit shaky over the course of the last week. But the hard economic data, I just don't think we've had enough of it yet to fully reflect some of this softer data. I mean, I think the labor market, just given what's going on with Doge, right, I certainly expect softening there. And I'm not going to be surprised to see UI claims keep rising. But consumers still look okay. I mean, the consumer spending data was bad, but that could be seasonal, that could be a one-off kind of thing.

Income still looks strong. So I'm not super concerned about that one month of bad data. Well, at the very end of this podcast, I'm going to come back around and ask for your probability of recession. We haven't done that in a while just to sum it all up. But Adam, you heard Mercer's kind of take on the data, anything you want to flesh out or highlight or call out? And I'm, you know, most obviously interested in your broader take on what's going on here as we make our way into early 2025. I think what we're seeing really is just the delayed effect of the all we've got interest rates are above the neutral rate. That's that's my belief.

I believe we're still above the neutral rate. And if you think that that's true, none of this is mysterious. Right? This you just job growth just gradually decelerating, right? And so the more it decelerates, the more you get these signs of kind of weakness in the economy. And you start to see early indicators. And I just think, you know, what is it, 4.25 to 4.5 right now? Yep.

The fun. I don't think that's the neutral rate. I don't think we're there yet. I think that it's taking a long time for things to work for the inflationary pressure that we had to finally work at straight through the economy. me. I think we made a mistake of raising expectations, right, raising people's expectations and inflation. And that's the kind of, you know, toothpaste you can't put back in the tube quickly. So it's taking a little bit longer to bring that out. That plus, you know, it's not like deficit spending has gone back to normal either. So, you know, everyone talks about ARP,

but it wasn't just ARP, right? It was ARP and then it was debt forgiveness and it was, you know, You're saying the American Rescue Plan, the COVID relief plan, yeah. Yeah, there's a tendency to look at like the fiscal stimulus as being something that happened in March of 2021. And since then, well, how can we still be talking about it? But it's like it wasn't just that. I mean, there was a lot of student debt forgiveness. There were things like the rent moratorium that put money into people's savings. So, and deficit spending remains higher than it was before the pandemic.

And so when you have that kind of. pressure and you have, you know, the inflation expectations pushed up. It's just taking a while for interest rates to sort of push the economy back to normal. And I think that we're, we're mistaking a slow return to normal for a higher neutral rate. And I don't think that's the key. I think the neutral rate is probably higher than it was pre-pandemic, but I don't think we're there yet. So do you have a sense of it?

So we're at four and a quarter, four and a half on the funds rate. That's down 100 basis points, a percentage point from where it was at its peak in late last year. Do you have a sense of what the neutral rate is? You know, that's the, I'm enjoying the liberty of not being involved in economic forecasting anymore. I don't have to do that. I don't have to do that anymore. But I just, I don't think we're there yet. And I think that a lot of it comes down to productivity growth.

And if you think that I hear people say, well, productivity, productivity, growth is much stronger now than it was before the pandemic, right? So the neutral rate should be higher. But that only works if people believe that, right? Like productivity growth work, pushes up the neutral rate because businesses think that the return on investment is going to be larger. Households think their real wage growth is going to be larger and therefore both spend, right? Businesses spend and invest, household spend and invest. And so that pushes the demand for savings up and the neutral rates higher, right? But if you and I, and all the, the economists in the room saying, oh, my gosh, productivity is 2%. It's up now. But if people don't

believe that, if businesses don't believe that, and households don't believe that and it's not in fact your expectations, but it's not going to affect the neutral rate, right? Not until productivity growth stays up high enough to convince everybody. And so I don't think everybody's convinced yet. So even if productivity growth is higher, I don't think it's really pushing the neutral rate up that much. Just to remind you for everybody, we've talked about this a lot on the podcast, but the neutral rate is simply put the rate at which a policy, interest rate policies neither are supporting or restraining economic growth. And you're saying the current rate is higher than the neutral rate, therefore it's restraining growth. So you're saying growth is slowing,

but no big surprise. The interest rates are high relative to where they should be to be neutral. That's what you're saying. That's right. That's right. I think you can see the, if you look at the construction sector, does this look like a sector where we're at sort of neutral, right? Like that the current rates are consistent with the kind of long run activity we need there for a healthy economy. Like housing starts are coming right down. Everyone you talk to you, I don't know, maybe this isn't true for you guys, but everyone I talked to in the construction industry is fairly panicked. They're panicked about the tariffs is what they're panicked about. And they don't, they weren't happy before that either. I mean, you know, true. So I, I just, it doesn't. It doesn't

It doesn't seem, you know, in the aggregation, which will come back to. They're worried about that, too, because as you know, better than I, the industry relies very heavily on immigrant labor. So, yes. Yeah. So if you look at the aggregate, I don't believe neutral rates as high as it is. And then if you look at kind of more micro stories of like, okay, here are interest rate sensitive industries. Do they look like they're at an equilibrium? I don't see that.

They seem like they're dealing with activity. It can't go on like this. It can't sustain. And I think if we don't, if rates don't come down further, we're going to see more signs of stress in construction and other interests and industries. For the record, and I don't want to go down this rabbit hole, but just for the record, we estimate the neutral rate to be three and three quarters percent. So we're in the camp. It's above equilibrium, but, you know, within spitting distance, I guess, I would say. But, but you're right.

Chris, what are you thinking? A percentage point above is that still. It's about a half a, well, I guess about a half a point above, about a half a point above. Yeah. Right? We're four and a quarter, well, you know,

half point to three quarters of a point above, yeah. Chris, what do you think about the economic, what's the economic day say about the economy's performance and,

you know, what do you think about this broadly? I've got a view too, obviously. I'll express it after you express your answer. Sure. Yeah. So,

maybe I echo some of Marissa's sentiments here about just the increased fragility in the economy. That's what I see, just consumers, businesses, just on edge for a variety of reasons, right?

There is the higher for longer interest rate that Adam points out that continues to have a grinding effect, particularly on some sub segments of the economy as you think about lower income households in particular. But the hard data, if you will, suggest the economy is still performing, the labor market is still delivering. There are some signs of potential weakness here, but the weakness in spending this month is after a pretty strong, December, right? So you have to look through the glass, look through the entirety of the data here. And so right now the trajectory is still, I would say, fairly solid, but there are definitely lots of potential fissures here. And I think that's the, that frailty, that fragility is, is showing up in certainly some of those confidence measures. And if we're not careful, right, then they'll,

they will show up increasingly in the hard data as well. Spending goes down, investment goes down, unemployment starts to rise. That's not my forecast just yet, but there are just so many other, so many uncertainties here that it is having a chilling effect. Yeah, my sense is the economy stepping down pretty meaningfully in terms of growth. I mean, last year, calendar year 24, GDP was growth was 2.8%. That's real GDP growth. It was a little over 2% in the fourth quarter.

and Marissa, you said it wasn't revised, so it was still kind of, I think it was 2.3%. And just got hot off the presses. You know, we do the tracking estimate for GDP based on all the incoming data. And we got to, as we were talking about, a lot of incoming data. You didn't mention the trade data, by the way. The trade data came out. Oh, yeah, I didn't. Yeah.

Now, that should have a big increase in imports probably related to tariffs, my guess. So that probably overstates the case. but we're down to 1.2% on Q1 GDP growth. Now, some of it is perhaps tariff-related, you know, the pulling forward of imports. Part of it might be, I agree with you, Adam. I think rates are high relative to equilibrium. I think that's playing a role.

The timing, though, feels, you know, just the step down was too big to be simply, you know, a rate that's above equilibrium. that, you know, it kind of felt too nonlinear for that to be the case. But anyway, I think that's a playing role. I also think it's got to step down by definition, right? Because last year we got in the year before a lot of labor force growth that allowed the economy to grow more quickly without generating inflationary pressures.

But now immigration is way off. And again, we're going to come back to that in a minute. And labor force growth must be slowing. and therefore, you know, if we don't get some step down in growth, we've got another problem, inflationary problem. But in my view, my sense is that the big thing that's playing a role here is uncertainty, policy uncertainty. You can see it in all the surveys.

You can see it, you know, the NFIB survey. You can see it from corporate earnings when CEOs get up and CFOs get up and talk about their earnings or talking about, you know, economic policy and just trying to figure out what's going on. and, you know, it's intuitive. I mean, look at the tariff policy. It's all over the map, you know. It's on again, off again, China, Canada, Mexico, which products, which, which, you know, over how long, what period of time, you know, these things are highly uncertain.

It's Doge. It's kind of the haphazard way about cutting jobs. I mean, it's just, I think it's very disconcerting for not only people that are working in the federal government, but all the private, sector folks that, you know, cater to the, to the government through the, through good goods and services they provided the government. And just more broadly, I think people are watching this and saying, whoa, you know, this is, this is very unnerving. And then I don't know if this is seeping into the collective psyche yet, but it will is we got the potential for a government

shutdown in two weeks. It feels like a real possibility to me. And then we got the Treasury debt limit coming this summer. That's definitely not planning anyone's thinking. But that, will be playing in everyone's thinking in the not too distant future, we're going to be in the middle of a pretty, I think, knockdown, drag out battle over the Treasury debt limit. So it just feel, and, you know, immigration policy, you know, all the things going on with a regulatory policy. It just feels like everywhere, there's just, everything's up in the air. And, you know, if that's the case. And even the Fed's saying it, the Fed's saying, look, I'm not going to cut rates any further until I get clarity around economic policy. I'm going to sit on my hands. That's what they said. That's

the message I took from the minutes from the last meeting is that, you know, we don't know how this is all going to play out and what it means for inflation and growth. So we're just going to, you know, sit on our hands for here for a while. I think increasingly businesses and consumers are doing the same thing. It's not that they're cutting. That would be recession, but they are sitting on their hands. And that's much weaker growth. So I think I worry about that. I mean, that's why I sent off the yellow flare. And the thing that the line between slowing in growth and recession is simply sentiment, how people feel. People, you know, lose faith, you know, and that goes to the consumer confidence measures that you mentioned and start packing it in and stop spending. We're done.

You know, we're going to get into that self-reinforcing negative cycle. I'll stop there. Adam, I'll turn back to you. Any comments on what I just said? Yeah, I think it's possible. It seems a little early for me to see uncertainty really moving the economy that much. And I'm always cautious around January to be over interpreting changes. And so I don't really see the sort of step down in activity.

It looks more to me like a sign wave towards slower growth and slower recovery, especially given, as Marissa pointed out, some of the strong data that we still have. So, but that said, I think everything that you described happening will happen. Like, I think that tariffs and uncertainty are bad for growth. I think it makes the Fed's job so much harder. You hear this excuse that like, well, you know, tariffs are a price level shock and the Fed just going to look through that. It's like that's easy to do when inflation is 2%.

And you know where the neutral rate is. But when inflation is above 2%, you don't know where the neutral rate is. And the feds like playing, you know, very on edge with whether they're going to cut or not. That's like the last time you want a price rate shock, price level shock. Like they're not, they can look through it if they can tell what it is. But there's no guarantee they're going to be able to tell what it is given the huge amount of uncertainty that's going on. So terrible timing for that. I think it does risk delaying rate cuts that we otherwise would have.

I think it's bad for investment. So you look at like a measure like the VIX. And I think it's not too surprising. we're seeing pullback in the stock market. Like I think the uncertainty is real. I just don't think it's really affecting most business and consumer investment decisions yet, with the exception of maybe actually driving the imports up as people try to get ahead in the tariff. Yeah.

Interesting. And a great point about the Fed and uncertainty. Okay, let's do this because we're here. Let's play the game, the stats game, because that might. flesh out some of the data. And then we're going to come back and talk about immigration and the work that you've done there, Adam, in the policy proposals you've put forward. The game is we each put forward a stat. The rest of the group tries to figure that out through clues, deductive reasoning, questioning. The best stat is one that's not so easy we get it immediately, one that's not so hard,

we never get it. And if it's apropos to the topic at hand, and I'm not sure what that is, but so that, that gives us a lot of talking about. It feels wide open. It feels wide open. It feels wide open. All the better. So Marissa, we always start with you. What's your stat? My stat is 614. 614. Is it data that came out this week?

Yeah. Government data? Yeah. New home sales? No. That wouldn't be 614,000. How many new home sales were there? I think it was like 620,000 or?

There was a four in it. I thought there was a four in it. I think there is. And maybe it's like 624. And you're known to play with the game a little bit, take license with it. Oh, we're bringing that back up. Are we? 14, 614, $614,000.

What's the difference? You know, I meant $614,000. No, okay. This is 614,000. And it's not, it's not home. It's not housing related. Not housing related. It is something I mentioned in my rundown.

Not in the conference board survey. No, there wouldn't be anything there. Would it be in the conference board survey? No. And this is a government survey. Oh, yeah, government statistic. Adam, any ideas here? I'm terrible at this game.

Really? I can't be. Oh. Yes. Okay, I guess we'll just have to play kind of standard game. GDP. Is it in the GDP number? No. Is it in the... Oh, is it in the unemployment insurance claims? Yes. Oh, it is. Okay. Is that... What would that be? 614. Increase in Washington. Oh, DC UI claim increase? No, but close. Close.

D.C., Virginia and Maryland, U.I. claim. I don't know. I give up. It's the number of civilian federal workers filing unemployment insurance claims. Oh. They break that outside. I didn't know that. I didn't know they break that out. Always have broken that out separately. Oh, cool. And they do veterans, too, military veterans separately. So this didn't change. And this hasn't really, I mean, it is up from last year, but it's not, hasn't really changed in the last couple months since Doge has gone in and started doing all this stuff. And I think this is just testament to, again, the uncertainty of some of the status of these people that

are being affected, but also the fact that if people are getting pay, if they're getting any kind of severance pay, they cannot file, I mean, they can file, but they're not going to get unemployment insurance benefits or they're going to get a reduced UI benefit if they're collecting any sort of severance pay or continuation in pay, which my understanding is that most of the people that have been fired or put on administrative leave are being paid, right? At least through September is what we've heard. I don't necessarily expect the direct effect of Doge layoffs to appear sharply in the data, right, imminently. It could take, could be six months before we actually see it when people's

pay stops being given to them in September. But it's, it's worth watching. And it's worth watching just looking at the DC, Maryland, Virginia, UI claims in aggregate, because as I think you mentioned, Mark, I mean, this is going to have knock-on effects. for private sector contractors. It's going to have eventually secondary effects if, you know, they're talking about unloading a lot of real estate in the district, right? So talk about retail and restaurants and those kinds of things that eventually will be impacted by this.

Interesting. Yeah, I, that makes sense. So what you're saying is because these folks are getting some form of severance compensation, unlikely they're going to show up in the claims data at least for a while. Right. But it will affect, it feels like it might affect private sector workers that cater to the federal government selling goods and services. They might be affected more quickly.

So that might show up. Yeah, if they're not getting any kind of severance. I will testify from an anecdotal perspective because I, you know, I have a lot of points of contact with the kind of the, what they call the belt, euphemistically call the belt way bandits. I think that probably I don't like that term. Like, Adam, are you a beltway band? You mean the deep state. I meant the deep state. Yes, the deep state. Yeah, they, um, uh, and I, it, you can feel it. You can feel it talking to them. There, there are layoffs already occurring among many of those organizations that typically do

do work for business, have business with the federal government. It can already feel it. Okay, Adam, you want to go next? You guys going to get mine. It's real easy. Reflecting might not be good. Now, that means we'll never get it. That's right. I know.

That sounds like a labor market statistic. No? That's a question. That would be part of participation. No, that would be. Oh, I know what it is. It's your favorite measure. It's prime age. I know Adam so well. It's prime age e-pop. Employment. Yeah. I thought it be apropos. It's appropriate. It's appropriate. Yeah, you want to explain?

It's the share of people age 25 to 54 who are employed. It sort of holds aside any sort of difficult measurement questions about whether someone is unemployed or not, whether they're into labor force or not. It says, let's focus on the prime working years and let's just look at whether they're employed or not. And it's my favorite measure of labor market slack. and I worked hard for several years to convince Mark to become a proponent. And I think I got you, right?

Oh, absolutely. I'm all, it's the first, the stat I look at it every month and the, when the job number come out. Absolutely. Yeah. And 80.7 would be consistent with full employment, right? Or what would you say? No, I think we can get, I think we can get it above 81.

I use the, really? I use the late 90s. early 2000s as the benchmark. So I think we can get it above 81%. So you think there's slack in the labor? Oh, this goes to your point about the Fed federal funds rate too being a little too high. Yeah. It's very hard. This kind of this kind of economy where you're trying to ring out inflation. Yeah. It's it there's a there's sort of this paradox where like the labor market is a kind of a source of tightness, but it's still like below where you would consider full capacity. And the example I would give is if you look at the 1980s, okay, I look at 1980 through like 1995 as one long

slack labor market because unemployment inflation was marching down, right? It wasn't like, it wasn't like Volcker raised rates and defeated inflation. And then in 1983, we had two percent inflation for the next two decades, it took a long time for it to come down to like that target level that we're at. So even throughout the 80s, I see that throughout the 80s is this period when unemployment was kept higher than otherwise would have been to sort of do like labor market repression and like to push those inflation expectations down gradually. And so we're not inflation didn't stay high as long. It's not comparable in that sense, but I do think there's a similar phenomenon where we're trying to ring

inflation out and so you have to hold the labor market back a bit. You can see this sort of in Larry Summer's comments that, you know, we're going to have to have unemployment surge to get inflation come down. Now that wasn't true, right, because we did have labor supply that could increase and that

sort of helped. But like I do think there is some truth to the idea of when you're trying to bring inflation down, you are even holding the labor market back. It just doesn't always manifest is outright decline, outright layoffs, is just below sort of full capacity. So in the world where we arrived at some sort of soft landing,

interest rates can truly be at the neutral rate and normalize. I do think that our true full employment utilization rate is going to be above 80.7. Oh, interesting. When's the last time we were over 81%? It has to be a long time ago. Early 2000s. Early 2000s, okay.

Yes. The late 1990s, early, 2000 is my benchmark for what full employment should and could look like. And that's being generous because we're a lot more educated than we were then. And so, you know, for structural reasons, you might suspect we can do even better. I guess consistent with your view is wage growth continues to moderate, at least I think, right? I mean, it feels like it's three and a half to four percent. It feels like it's still edging lower. So consistent with the idea that there might be a little bit of slack there still in the labor market. And consistent with the idea that the Federal Reserve

is still trying to get inflation back to target. It's not quite there yet. So, yeah, interesting. Let's do one more. Chris, you want to do yours? Sure. 4.6%. 4.6% in the GDP? Nope. Came out today. Oh, income. Say that again, Chris? Came out today. So it's, in the income release? In the income release. Oh, the saving rate. The personal saving rate.

Adam, who was first? Me or Marissa? Just asking. Come on, man. You got to rewind the tape. You got to rewind the tape. You got to be quick on this game. All right.

Saving rates. Oh, I meant to ask, there was a big jump in personal income, but it looked like it was non-wage income. Is that just cost of living adjustments, that kind of stuff in the January, to Adam's point that the January date is always a bit squirrely. Yeah, because the compensation was point four and it was point four last month too. It was

proprietors income, rental income transfer payments. Yeah, which should be seasonally adjusted out of there. I don't know. I'm not sure what's going on there, but it looks like seasonal thing. Right. Right.

Yeah. The cost of living, the cost of living increase was two and a half percent. Two and a half. Right. Over the year. Yeah. Hmm. Chris, why did you pick that number, the four, six?

It was a big jump, one for a percentage point from the month before and highest level since June. I think it speaks to consumers who are, they just normalizing savings rates, right? They've been low. they need to get back up to a more appropriate level, right? A lot of consumers' households need to replenish the savings that they exhausted. And then on top of that, I do think there's a precautionary element here.

So some of this uncertainty is going to translate into consumers, again, just sitting on their hands, and that's going to help savings, certainly, but at the cost of more spending, right? So that points to this idea that the economy is going to slow from here. and you can already see some of that data or some of that effect already in the data here. Very good. Let's move forward then. I don't have a statistic.

I was too lazy. I don't know. Somehow I missed. Usually I'm very well prepared, but I don't know. Maybe because we were doing so many podcasts we did a podcast yesterday. Maybe that's what's going on. But anyway, I'm not prepared, so we're going to move on. But it's good timing anyway.

Adam, let's turn to your recent work. And maybe give us a little bit of context. You know, you're at the Economic Innovation Group, EIG. Why did you focus on immigration and immigration policy in your work? Why is that front and center in your research right now? That's a great question. I think it's an area that more economists should be focused on because there are few characteristics of high school immigration that make it unique.

One is it has direct high certainty substantial impacts on innovation and entrepreneurship. If we turn up the dial on highest immigration, you know that in the next year, right, the year and two after that, you're going to see a movement in patenting rates, in entrepreneurship rates, because they're more innovative, they're more entrepreneurial. real. And there's really, you know, industry impacts too. So you look at like our attempts to catalyze a new semiconductor industry. Like they have huge impacts on that. Like Taiwan, TSM couldn't be doing what they're doing if they weren't allowed to bring in the workers that they have been allowed to, to their, to their fabs. And so you have these really important things.

Normally if we're like, all right, we want to, we want to increase innovation in the United States. that's a hard thing to do, right? It's like, what are we going to cut the corporate tax rate? Like maybe, well, maybe that'll indirectly do it or like R&D incentives. Like, you got a structure them right and you've got, you know, sort of these estimates of how they might work, maybe eventually in the long run, you know, increase, changing at universities. Like, these are hard levers. Entrepreneurship similarly.

Like, getting more entrepreneurship is very difficult. So the literature is very clear that there is substantial. by certainty, really known impacts of these things on these outcomes that we really care about that are prime drivers of productivity growth. And the other thing that sets it apart is any other policy that you think might work

on those things eventually is expensive. Right? Like R&D, expanding universities, like there's no free lunch there. Highest immigration could raise, we did a fiscal estimate of just expanding H-1Bs and just direct effects,

excluding innovation effects and entrepreneurship effects, it's not hard at all to raise a trillion dollars over a decade just by expanding skilled worker visas. And so this is a policy in a league of its own. There's nothing else like it that can move these things that we want to move that are so fundamental to growth and prosperity. And you do it and you make money doing it?

Like, this is so, it's such a no-brainer. and it's so important. And so that's sort of what brought me to the topic. Yeah, it makes perfect sense. I meant something that's been bothering me. I haven't looked into it, and I've not seen anyone right about it. But since the pandemic, we've seen a high level,

at least from the IRS data that we follow, the EIN data, the tracks the identification numbers of new companies that form, high level of new business formation. Even to this day, it started with the pandemic and to this day, And last time I looked, it felt broad-based across lots of industries, almost everywhere in the country.

Well, the most recent data has been a little weird, more concentrated in a few states, but, you know, broad-based. Have you looked at that data? Is that connect back to the immigration story? Because, you know, it does correlate with the surge in immigration that we've seen over the past several years. Do you think they're related? Or have you looked at that at all?

Just curious. Yeah. So I think it's still a bit of a mystery. Mystery. But I think that there are a few factors that are highly plausible. So one is you had sort of a shift in geography of where people were moving a bit post-pandemic. And so like when you see these areas that are seeing growth that haven't really seen a lot of growth before, like my favorite example is like northeastern Pennsylvania is like really seeing a ton of growth, right?

People are moving there from New York City. So you have these moves from the urban cores to out of ex-urban areas and rural. And I think that's part of the story. I think remote work is part of the story. It's pro-entrepreneurship. You know, it's easy to be an entrepreneur. Entrepreneurs and freelancers have always been more remote than regular workers. So I think that's part of it too.

I haven't seen any research on this, but I think house prices probably play a role. There's an older literature showing that rising home prices increase entrepreneurship via the collateral channel. If you want to start a business, having that collateral is really useful. The Homelanders' Equity, you're saying, and the built-up of the house. Yeah. I think those are part of it. Immigration, possibly, as well. It did sort of predate the immigration surge. Like, it started pretty early in the pandemic, like surprisingly early.

But it could be, it could definitely be playing a role. I would say it hasn't really been decomposed into these various channels and maybe some other mysteries. Yeah, I think that I'd love, I think that would be a good, something to really dig into. I know economists don't like using scatter plots, but we did do a scatter plot comparing the number of businesses that formed relative to the size of the economy on one axis. This is across, I think we did it across counties. I think we did.

It was a scatter plot against counties. And on the other axis was immigration, you know, the immigration over the last few years. And it's visual. You can see, you know, obviously, I'm not controlling for lots of stuff. But it's very suggestive of immigration, you know, having a role here in the high formation rates that we're observing. But let's go back to the study.

One other broad question I had until we start talking about, you know, some of the impacts and some of the policy proposals that you have, why just high-skill immigration? Why not all immigration? I mean, my sort of narrative has been, and I'm totally on board with you. I think there is no better way to move the dial on the economy's potential growth rate and also address our long-term fiscal issues, because if you get a few, a tenth or two more on GDP growth every year, you're going to generate a lot of revenue and there'll be less spending and you solve your, you address your fiscal issues in a very significant way, and that's much easier than raising taxes or cutting spending as we're figuring out here pretty

quickly. So I'm on board. but why why just high skill? Why not? Are you saying that we, that, that there's a, well, I'll let you answer the question. Why high skill? Why not all skill levels? Yeah.

So I'm still a big proponent of all kinds of immigration. So this isn't against low-scale immigration. But I think there are two reasons, one economic and one sort of public choice. we ran a survey on on immigration we were in a few of them actually and before the election and what we found was that 71% of people who were planning to vote for Trump this was back in like October support more high-scale immigration and it's extremely popular the number is like closer to that stat in your in the game 71% of course I didn't think you had you would never gotten yeah I thought about it

I thought about it. But like that is extremely bipartisan and popular. And it's not just our survey data. Like you can look at anyone who's surveyed the public on high-scale immigration specifically. And there's two reasons that. One is that the public really doesn't like illegal immigration. That is not popular. And then legal, low-scale immigration is more mixed.

It's in the middle. High-scale is super popular. And so what ends up happening is that, especially in D.C., you have this idea that all immigration reform has to be comprehensive. It has to be comprehensive. Like, this is the way it must be done. But you end up with Republicans and Democrats both have demands about low-scale immigration. And they both think that high-scale immigration is their bargaining chip. So Republicans will be like, look, we're going to give you amnesty or we're going to give you high-scale immigration, but you have to give us the border.

order and Democrats will be like, look, we'll give you highest immigration, but you've got to give us amnesty. And if it's everybody's bargaining chip, it's nobody's bargaining chip. And so it's just low skill and family based immigration overall is very complicated. There's a lot of, you know, moral values issues involved there. And wherever I land on those issues, it's very, very different from a policy that is so clearly self-interested, right? And so that's like the public choice case. The economic argument is that when you talk about the benefit to U.S. workers from low-skilled immigration, you have to talk about complementarities, right?

And I think that these are real, okay? But if you look at like estimates that focus on sort of like these sort of like labor elasticity based estimates, like what are the spillovers of different kinds? On the negative side, you get George Boross who's like, well, it reduced median weight. growth by 0.3%. And the positive side, you get Giovanni Perry, who's like, oh, well, increase median wage growth by 1%. These are not big numbers either way, right? They do not move the dial very much for the median worker, positive or negative. Just focusing on complementarities and substitutes, that sort of very relative labor supply-centric approach doesn't move the dial for the

median worker, even though we know that immigrants are on average kind of compliments. But if you look at high-skilligration, you have numbers like, over the last few decades, I think from 1990 forward, high-scale immigrants contributed 36% of the innovative output of the U.S. economy. Now, what do you think that did to the median wage, right? Like 36%. And this is like, this is an awesome study. They looked at premature deaths of immigrants. inventors and they look at patenting, they look at stock prices. Rebecca Diamond, really awesome recent study, but it's not alone in this. You can look at estimates from state-based models when the immigration population,

high-scale immigration population increases by like 1% patenting increases by like 9%. Those are things that are going to really substantially move median per capita income. And that's just a totally different economic impact. And so that's one of the things I try to do in my paper is like economists have got to get over this compliments, substitutes, focus when it comes to immigrants because that's not where the action is. That's not where the benefits come from. That's a small thing. Even if there's truth in it, it's like moving the dial a tiny bit. These other things are like just substantially, substantially changing the economy in really positive ways.

So it's just, I think for those reasons, you've got the economic, different economics. It's different politics. They should be considered separate. You said innovation output. You use that term. How do you measure that? What does that mean innovation output? So in their study, they use patents first, and then they use citation-adjusted patents.

And then they take this approach where they look at the impact of patenting on stock market values. And so that's how they kind of translate firms. Firms have a patent. It was a stock market. then you can sort of apply that to the private sector or private markets as well and you sort of scale it up. Right, got it. But it's true even if holding economic values, it's true even if you just look at like simpler things like patenting counts, citation adjusted patenting counts. It's like a third.

It's like a really, really big number. Well, the most intuitive thing for me is just go take a look at the senior management of the magnificent seven and, you know, take a look at where they're from. I think they're almost all all of them are immigrants I think well except for maybe Apple and Tim Cook right I mean let's turn to the policy proposals and I you know right now the correct me if I'm wrong but the principal way we bring skilled labor into the country will sue the H1B program but you've got some views about that program and some proposals on how to improve that do you want to go through that I think the listeners would be very interested in that. Yeah, I think that, like, you know, what we really need to do, this is the other big point of the paper was to don't look for like a little tiny tweak or fix. Don't look for something that like sounds great. Politicians love to say, let's staple green cards to diplomas.

And like, that's not, I take it, right? If like if that's what's on the table, I'll take it. But like that is so far from ideal immigration policy. So like I start with a rethink of the economics. Why do the high school immigration really matter? How does it actually work? And then like, okay, design policy based on that. And reforming H1B is a big part of that.

So obviously it needs to be bigger, right? Like it's just the number was set, you know, in the 90s. It hasn't grown since. You have, you know, it's way more applicants and then you have H1Bs handed out every year. It's oversubscribed. And like the benefits of these workers are huge. And so like the idea that we need to be like carefully constraining this, it doesn't make sense. It should be much bigger.

but we should also, instead of doing it by lottery, we should do it by something like age-adjusted wages, right? Someone should have to have a real job offer. You make an adjustment for how old they are, right? Because like a 50-year-old who makes $200,000 a year is not as impressive as a 25-year-old who makes $200,000 year. Their lifetime incomes are going to be different, right? And so you make a small adjustment for age,

and then you just use wages, and that's how we should ration them out. We should give them to the people who are making most money. So you do that. And then there's other reforms that are really important as well. Like we need to change, we need to make green cards to be more automatic, uncap them, make them merit base, right? Like if you're earning a high level, you should sort of be able to be automatically get a green card, get rid of the country specific caps.

And then we need to reform student visas as well. And the whole system needs to be changed and smooth and supportive. You had a catchy way of describing that visa. maybe you mentioned and I missed because it was a bit distracted. What's the, what do you call these visas? The skilled worker visas. So we think you just,

it's not as snappy as I thought it was. It's snappier than H1B, I think. We can clear that bar. Yeah. Snapp than H1B, right. Yeah. Yeah. So we, we were, oh,

maybe you're thinking of EBX. That's our green card. That's the snap. Oh, that's what it is. Yeah. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. uncapped income-based green card. If you're making over like 75, 85 percentile of earnings, you're doing it for six years, you can self-sponsor yourself for a green card. All this fake stuff about like prove your employer needs to prove they couldn't hire someone.

It's absurd. It's absurd and it's fake. And also it comes from these myths about how immigration works. This is the problem. When economists say, well, immigration do a job, do jobs someone else wouldn't do. That may be a convenient rhetorical advice, but then people go try to write policy based on that assumption. They say, great, all you got to prove is a native couldn't do the job. Yeah.

Right. You also have a visa called a Heartland visa. Did you want to describe that? Yeah, this is our place-based visa proposal. So the idea is that if counties are sort of demographically declining, they've got falling population, falling prime population, and their housing mark, their house prices. are relatively low, then they can opt in, right? Like the local government can opt in to the Heartland visa,

and then it's a skilled worker visa. So the skilled workers have to come and live in the Heartland visa. But it's sort of like the skilled worker visa, but it just geographically restricts where they can live. I mean, we've got such a divergence in economic geography, struggling places in the most successful sort of coastal cities, and part of it is due to where skilled immigrants live. The most innovative, skilled people want to live in those places.

And so this is a chance to give, like, you know, other parts of the country and the ability to more marginal, you know, more immigrants into their area. And I think it could be important for development there. Yeah, it just seems so intuitive and obvious. And, you know, as you mentioned politically, both sides kind of agree, right? I mean, what could be wrong with bringing the best in the bright? is from the rest of the world here and keeping them here. Because they're going to create jobs and wealth and drive the train. And you know, this is, you can see it across the globe.

Just go look across the globe, look at different countries in their immigration policy. Those countries that have immigrants, compared to those that don't have immigrants coming in the country, there are two different stories going on here in the world. And this is going to be, this demographic fact is going to become even more obvious going forward, given the declining and fertility rates around the world. I was just reading about South Korea. and fertility rates, they're through the floor. I mean, that country is going to evaporate unless something changes, unless there's, you know,

they can address it through something like immigration policy. So it just seems so obvious and so obvious. So what's wrong? I mean, is there any, you know, is there something in your proposals that people object to or take umbrage with or say that's not going to work for some reason? Is there something that you want to point out that people put forward that suggests this just isn't going to work or it's a bad idea? I don't think there's any like, I really think it's such a strong idea.

There's not really any like empirical or, you know, realistic argument against the positive impacts. It all comes down to politics. And I have the hardest time in the world convincing people of the polling stuff. People just don't believe it. They think, you know, Donald Trump won the election and people, it's a time for reducing immigration. And the voters have spoken.

They don't want immigrants. You know, people on the left believe this too. And they're like, it's just not the time for this. You know, this is you've got to be, we've got to do what the populists are kind of asking here. And I try to tell these people like high-scale immigration is populist. People want it. They do. I really think a lot of people have the wrong mental model of immigration opposition.

I think they think if people oppose immigrants, they are racist and xenophobic and therefore it's unconditional. right they just oppose immigration that's what trump ran on opposing immigration it applies evenly but people really even an older you know public science literature on this show that people they don't oppose immigrants they sort of stereotype immigrants and then oppose them based on those stereotypes so if you tell people there are two immigrants one from Mexico and one from Germany and you sort of describe their economic characteristics and they're equal, people don't have a preference for one or the other generally. They see them as being relatively equal, right? And that's kind of where you'd expect, like, racist-based explanations to show up or xenophobic-based explanations to show up.

But then if you just say, well, would you prefer a German or a Mexican immigrant, then you see this difference. And the difference emerges because of negative stereotypes about how these immigrants are different. Right. And so it's not, it's not racism, right? But it's different. It's a different kind of opposition. And so when you tell people, we are going to have a policy here that's focused on high skilled people and it's only going to lend in high skilled people, even people who are otherwise negative about immigrants because they're stereotyping them, who otherwise are very concerned about the border or whatever, a lot of those people say, yeah, great, we want high skilled people. We want them of all strikes. So I think it's it's people aren't getting into the heads of immigration opposition. They're sort of like really crudely interpreting this populist movement incorrectly. Well, it seems like ironically, the best person to push this policy forward would be President Trump, right? It's kind of Nixon going to China, you know. Yes.

He's got he's got the cred here in terms of anti-immigration. So if he says, look, I've got the border under control. Let's get the best in the bright. And he's, I've heard that. and kind of say that in the past. Oh, yeah. Something that was a bad. He wants a big beautiful door, right?

He wants to close the border, close the border but put a big beautiful door in there. He said plenty of, and what's interesting is he actually, in his recent description of H-1BVs, not only was he positive about them, but he actually got the economics of it right in a kind of a nuanced way.

He said, he said, look, you let the skilled workers in, and not only, you know, are they doing a job here, but then the business experience, and then they hire other people. And that sort of takes care of everyone else.

So it's like a, you know, that's a very nuanced understanding of immigration. It's not a fixed high. It's a, and so, you know, I think he does get that. And there are a lot of tech people in his orbit that get it. But, you know, we'll see what happens there. You have to acknowledge also that in the previous, his previous term, he didn't do anything about it. If anything, he sort of restricted high-scale immigration and didn't help there.

So I think part of him. gets it, but there's people in his administration who are also not pro-hans immigration. Yeah, I will say, though, that I totally agree with you. This is the, it's so obvious. It's so obvious. And when it's so obvious, it's going to happen. It's just a matter of time. It's just going to get a political window at some point in time. Maybe it's after the border is completely, you have to control the border. You have to nail that thing down so that that's not the people, what people focus on when they think immigration. If that goes away as an issue in people's minds, then this becomes much more viable.

And then in the context of our own demographics, I mean, our own native-born population is, it's going to go negative here, you know, in terms of working-age population. Just that's inexorable. That's going to happen. And the pressure on businesses is going to intensify. And then I would think the political opposition from the general population will become, you know, will evaporate as well because there'll be, You know, there won't be issues with regard to jobs and wages. There'll be a tight labor market, and we get a window. But I keep going back to our fiscal situation.

You know, we're here battling over things like cutting Medicaid or, you know, trying to cut taxes for businesses to, if we really want to address our fiscal situation in a way that is politically viable and really move the dial in a reasonable amount of time, it's allowing from our high-skilled immigrants into the country. There's no other better solution than that in my view. So I think you're dead. You're just dead on. I did want to end the conversation about going around the table and seeing what people's probability of recession are.

We haven't done that in a while in the context of the recent data. But before I do that, maybe Chris and Marisal, I'll turn back to you, anything you want to push back on? or, you know, you can see I'm a, I'm a, I'm a, I'm a, I'm a, I'm a, I'm a prostitizer here on this issue. I totally agree with Adam on this. Any, any pushback on this or anything you want to call out? I'll go to you, Chris first. As an immigrant myself, I'm all for it. So there's no, no opposition. No opposition here. No opposition there. Mercer, uh, just a question, Adam, about the, the heartland visa, right? Is there enough supply of jobs? You know, is there demand for high-skilled labor

in some of these non-coastal Midwestern, middle of the country areas? Is it a chicken and egg kind of thing that this happens? Or can you explain a little bit more about that, the regional placement of immigrants, high-skilled immigrants? Yeah, so I don't see the pie as kind of being fixed. And I think that if there's one thing that sort of creates its own, creates its own demand, its human capital.

And, you know, as you let in more skilled immigrants, that sort of increases opportunities for businesses to invest in those places. Let me give you a concrete example. So if we fix the H-1B system so that's no longer done by lottery, the industry that's going to be really hurt by this is the IT, consulting industry, right? InfoSys, Tata, all those guys. They really depend on the lottery. They're like the lowest paying H-1B employers. One thing that I think would happen is like, you fix the H-1B. That is an industry that now can relocate to, they don't have to go away.

They just relocate to Heartland Visa areas. And so like if you, if you are looking at Buffalo, for example, as an employer, and you say, do I put my next office in Chicago or do I put it in Buffalo. Well, if I put it in Buffalo, I have a really easy, readily available supply to skilled workers from all over the world. That changes how you think about that place. And so I think like the Tatas and the infestances of the world will be really, you know, probably first movers at that, but there's tons of other opportunities as well. The other thing to know about is it would be both of our skilled visas and our H-1B fix, or skilled visas and our Heartland visas would allow them to work as entrepreneurs. And right now it's very difficult to come here on an H-1B and do any sort of

entrepreneurial activity. So immigrants are very entrepreneurial. They create their own opportunity. And so allowing them to work in that way, I think will help increase the demand for work in those areas. Okay. Well, a great study. We'll post it to the notes to the podcast. And I know you also have done a lot of work in the housing area, but we're going to have to have you back to talk about that because I was just, I didn't know that. You sent me the link and I was just perusing it, some really interesting ideas. And there's a big link between immigration and housing. So might want to talk about that. But let's end the conversation back to the economy, given, you know, all the things that are going on. And kind of the way we've been encapsulating

our kind of general thinking about things is what is the probability the economy is going to enter into a recession at some point in the next 12 months? Let's say 2025 going into 20, 26. And I'll just go around around the table and begin with you, Marissa, what's your, what's the probability of recession in the next 12 months? A third. A third. That's up where you were well, you asked this. I forget when the last time we did this was it was a couple weeks ago. Not too long. Yeah. And I think I was at like 30. 30. 30. So yeah, it's going up. The third. Okay. Okay. Chris. at a third. A third? You were also at 30, I think. I was at 38, yeah. Just, just bump it up.

What was your low, Marissa, in the cycle? What was your low? I really need to. I think you were 15. No, I was, I don't think I ever was at 15. I think maybe I was down to like 20. Yeah, okay. 15 being kind of the unconditional probability. You were at 15 recently. Yeah, I was at 15. That was not at that low. Yeah. Chris, what was your low? You were, you were, you're always a 25. 25. Yeah, 25. Adam, I'm putting it on the spot.

I know you don't do this for a living, but do you have a view? Can you encapsulate it in the probability of recession? Yeah, I'll put it at 20. 20. I think that, yeah, I think we have to be, I don't, I agree with Marissa on the fragility of the economy, but I don't see the correction, you know, I don't see like an economy. that's growing below potential and being restricted by policy as necessarily one that tipped into recession.

I would point to 2018 as a time when Trump was going wild on his trade war, right? The Fed had raised interest rates too high. You remember, they had to cut them because they were wrong about where the neutral rate was and they were discovering that. uncertainty was high and you could see the economy slowing you could just see the housing market just like take a breather, right?

And job growth slowed but we didn't we never went into a recession. It was all of the things that are happening now including the restrictive monetary policy. They were all present and we still we didn't end up on a recession. So I don't think it's necessarily the case that even if you think all of these bad things

kind of manifest, that it pushes us into a recession. So I'm still at 20%. Just a food for thought, Adam, on your point about the President Trump's first term, we don't know what the counterfactual is. I mean, if there had not been a pandemic, I think there was a pretty good probability we'd go into recession. Pretty good problem.

Totally other side of that. If there had not been a pandemic, we would have seen positive effects from a full employment economy that people did not think. I think the productivity growth would have been really. strong, you know, I believe in the verdun law story of full employment and productivity growth. I think we were heading to a really, a really great place. Well, of course, he could always do it, right?

He could always be, he could always choose to push us into recession. So, you know, you're to a certain extent forecasting his behaviors. But I think the die was cast. I think the die was cast. I mean, remember the yield curve inverted. Because the Fed was lowering rate. Mark, that was because the Fed was making. mistake. The Fed was making mistake. Don't remember my movie.

This is what I missed, what he left and left us. And now, you know, I don't get these kind of arguments anymore. Hey, but let me ask one more question about the yield curve. Obviously, the yield curve, this last go around, you know, inverted and we didn't get recession. Here we were back around again, the curve inverted. You know, I think, is it still inverted? Chris, I don't know. Yeah, but it's, yeah. It's just. I know it's small. I know it's small in the grand small. Yeah. Yeah. Did we put more weight on the curve as a recession indicator this go around than we did a couple three years ago? I mean, I never, I never bought into that, and I argued against it and didn't think we were going to have a recession. And I'm still not arguing

for recession. Oh, by the way, I'm at 30%. I think there's a 30% probability. And I'm up. You're up. I was 15. But I think the uncertainty is palpable. And there is a, Adam, go listen to that podcast from yesterday with the Gepeld from Breitbart. The one thing I took away from that was that President Trump is not going to be as sensitive to the economy in the stock market as he has historically. He's committed to these policies. And if you're committed to broad-based tariffs, I don't know. This feels like the prescription for a problem.

I like John Carney a lot. John's a nice guy. but he tends to think that his view of the world is Trump's view of the world. A lot of people want to believe that Trump's view of the world is their view of the world. That he's embraced. They have this esoteric theory and no, no, Trump has the same sort of esoteric theory and how things work. I don't think that's the case. Okay.

Okay. We're going to have to call this a podcast. But there's a lot to talk about and we'll schedule the next conversation, Adam, if you're up for it. Absolutely. go deep on housing. By the way, do you have any views on Fannie Mae and Freddie Mac? Just asking real quick. No, I don't. No. That would be fun. That's for you, Mark. I leave that. If I had that question, I would ask you. That would be fun too. You should get some.

You should get some. Get some for the next conversation. Yeah. Yeah. Anyway, thanks so much, Adam. It was really always a pleasure. I, you know, very much enjoy your insight and great conversation. Thanks, family. Always, always glad to be here. Happy to come back anytime. great and dear listener hopefully you enjoyed that and we're going to call this a podcast take care now