Moody's Talks - Inside Economics - Monthly Jobs and Mark's Journey

Episode Date: October 7, 2022

Colleague Dante DeAntonio, Senior Economist at Moody's Analytics joins the podcast to analyze the September U.S. Employment Report and OPEC's announcement to cut oil production. Everyone gives their latest odds of a recession and how soon that could happen. Full episode transcriptFollow Mark Zandi @MarkZandi, Ryan Sweet @RealTime_Econ and Cris deRitis @MiddleWayEcon for additional insight. 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 the regular crew on Jobs Friday. This is Friday, October 7th. The employment report for the month of September just came out not too long ago. And we've got the regulars. Chris DeReedies. Chris is the deputy chief economist. And Ryan Sweet, the director of real-time economics. And Dante, good to have you aboard. I was just asking Dante, how should I identify you? And he says, you never identified me. So we should just do that again. But Dante is a wonderful labor market, well, economist period, but focuses on the labor market. And just to remind folks came to us via the Bureau of Labor Statistics. So he's got an inside view on all this data. Hey, guys, how's it going? How's everyone feeling today? I feel. Great. The bigger questions, how are you doing? Well, I am in Singapore. I just, rolled in. It's now 10 p.m. Is it 10 p.m.? No, 10.30 p.m. Singaporean time. So, you know, 12 hours difference. It's 12 hours on the nose, yeah, which makes it easy. I was just in Dubai

before that, and that's eight hours, and I was in London before that, and that's five hours. That's more complicated. I always get confused with the time zones. But, well, I'll talk about I traveled. I was in London the last week when it was just complete chaos. And then this week I'd been in the Middle East where a very different kind of vibe. They're doing pretty well. In fact, probably that's the strongest part of the global economy right now because of the higher oil prices. But of course, when I was there yesterday, the day before OPEC announced his production cuts so we can talk about that. But now I mean, do you sense a pattern? Yeah. I'm sensing some causation here.

Yeah. I'm really good at the market. Problems. Yeah. Yeah. You're right. Everywhere I go, well, so it goes here in Singapore. And then my last stop is in Tokyo.

That should be interesting. I had to toward Tokyo. And then I'll be home. Can't wait. Can't wait to get back to the United States of America. But, well, a lot to talk about today. But first up is the jobs numbers. And Dante, would you mind?

Can I ask you to kind of run through the numbers and give us a sense of how you view the numbers? I think all in all is a good jobs report. It's not as rosy as it's been in recent months, but I think in some sense it's a good thing. Job growth continues to moderate. We added 263,000 jobs in September. The unemployment rate ticked down by 0.2 percentage points to 3.5% matching its low since the pandemic started.

Labor Force participation down a little bit, which is probably one of the more problematic things in the report, you know, still waiting for participation to really tick up and then we backtracked a little bit in September. Job growth is still broad-based. You know, we start to see a little bit of weakness creeping in in some expected places, I think. You know, financial services, payrolls pulled back a little bit, and that's, you know, mainly housing market related, a little bit of a pullback in transportation and warehousing as you've got a little bit of reduction in goods demand happening. Government was weak, but that's mainly a seasonal issue in, you know, local government

education payrolls or the timing of teachers coming on and off payrolls coming back to school. But all in all, job growth is still broad-based across industries. Wage growth is still strong, which again is not necessarily a positive in light of everything else that's happening with the Fed. It's a good report. Well, I don't know. I find it mind-numbing kind of report, right? Because we're in a world of good news is bad news.

Bad news is good news, right? I mean, and you kind of said it wasn't quite as rosy, meaning job growth was slower than it has been. But maybe that's a good thing because that in a world of full employment, and we're definitely full employment, 3.5% of unemployment, right, high wage growth 5%, and obviously very high inflation, 8% plus, that would suggest that we need to see some moderation in job growth. So in this case, good, if it's good news, meaning strong job growth, that's bad news, right? Because that means, you know, we're going to make less progress on getting the inflation down to a place where we all feel comfortable with that and can allow the Fed to stop tightening policy. So which is it?

Is it, you know, if you're looking at it through the prism of what does it mean for, you know, a slowing labor market, job market wage growth, getting inflation in, getting the Fed. to stop raising interest rates. Is it, is it good news? Is it bad news? How do you view it? I think it's probably middle of the road. I actually think it's probably not moderating as fast as we would like it to. So I think in that sense it's probably not great news. Because underlying growth, you know, the top line number is 263. But if you sort of take out the government volatility there, underlying growth is still probably around 300,000, which is obviously much stronger than it was pre-pandemic and much stronger than we need it to be to keep pace with with population growth and labor force growth.

So I think in that sense, you know, we could, even faster moderation would be good news for the Fed. Yeah. So, Ryan, I want to fill any holes there in Dante's a quick synopsis and, you know, give us your interpretation of the numbers?

I mean, the unemployment rate fell for the wrong reason. More people left the labor force. The labor force participation rate, I mean, if you adjust it for population or in demographics, it's roughly where we would expect it to be. So I'm not too concerned about that.

But to your point, the job market's not slowing fast enough for the Fed. And I think why markets are selling off today is that 75 looks pretty much guaranteed. We get the CPI, the Consumer Price Index next week. That's going to seal the deal between a 50 or 75 basis point rate rate rate. But the job market is still too hot for the Fed. Yeah, well, okay. So I saw it before today's numbers, the markets is as implied by the futures markets for the federal fund rate target,

the rate the Fed controls, was anticipating or pricing in with a pretty high probability, a 75 basis point, a three quarter percentage point increase in the funds rate in November, a half a point increase at the December meeting, and then a quarter point rate increase early next year. And then they would stop and that would, you know, for a while and take a look around. That was my before today's numbers,

That seemed to be, at least last time I looked, that was what the markets, investors were saying. Is that roughly right? It's a little higher than that. It's a little higher now. Yeah, the terminal rate is getting up to 4.7% now. Yeah. Yeah, but if you just follow through on what I just said, that gets you the terminal rate of 475. I mean, four and a half to 475.

I think you need one more hike in there. I think so. Oh, do I? Yeah. Okay. We're not going to beat you all too much. You've been flying a lot. So the funds right now is what?

It's 300 to 325. Oh, 325. Oh, so if I had another 150 basis, no, 150 basis points, right? That gets money to 475. Yeah. Well, I'm right. Aren't I right? Yeah.

You said 75, 25, 25. Oh, no, no, no. I said 75, half a point and a quarter point. 75. Oh, okay. I'm not right. Yeah. Okay.

I don't get sleep, but I'm still right. We're making sense. Yeah. We're going to have to go back and revisit the tape there. Yeah. Ben, producer, go when you have a chance, go back and rewind. I think I said that. But anyway, but that's what the markets were expecting before I thought.

And are they still, they're still expecting that? Or they, I guess, with greater. That's still there. Still there. Still there. Okay. I guess maybe there was some. Maybe it's one of those deals where investors were kind of sort of pricing and are hoping that we get a, you know, everything looked good in the report to suggest that they could maybe take their foot off the accelerator a little bit and not follow through on that. And they got disappointed.

You know, I think people got encouraged by the Joltz data, the job opening and labor turnover survey where we got a big drop in labor demands. The number of open positions fell. So I think there was some growing hope maybe that the Fed can dial back, but I think today's new data kind of squashes that. Yeah. Okay. All right. Ryan, before I go to Chris, anything else in the report you'd call out? Well, my favorite number. I made employment to population ratio.

It's north of 80, so I think it rose. Did it go up or go down? Tick down by a 10th. Yeah, but still remains. It's still hot. Yeah, no, no, wait. It's 80.2, right? Correct.

So, I mean, 80 is kind of the rule of thumb for full employment, right? So 80.2 is read full employment, but it doesn't feel like we're at least one. Yeah. Yeah. Okay. So we're kind of in the sweet spot. Right. Chris, what about you?

What, what's your, want to fill any holes in the numbers and what you? your sense of the report? That's my take. No, any other time, this would be a great report, right? We say, oh, much faster than what we need for population growth. But at this time, of course, it's negative. I think what the Fed focuses on is the wage growth. So 5% average hourly earnings is still too hot.

I think it moderated a bit from 5.2% growth, but still that's too hot. And they're going to look at the ECI Employment Cost Index to make that final determination. But I think 75 BIPs at this point is sealed in. Yeah. Okay. I mean, the way I look at it, the report, and why it's so confusing, you know, why you can, depending on which angle you look at it from, you get kind of a different sense of it, is there's labor demand and then there's labor supply.

on the labor demand side, and this is what businesses are demanding workers, that is, that seems to indicate that that's slowing. So job growth is slowing. We can debate what underlying job growth is abstracting from the vagaries of the data, but it feels like it's about, you know, not quite half of what it was back in the summer. We're getting $500,000 plus. In fact, last year, I just, I saw this in the report. I think average, monthly job growth in 2021. It was like $560,000 or something like that. We're down to something like $420,000 so far in 2022. And it feels like we're, as Dante said, probably around $300K right now. So we're definitely moving in that direction. And then you add to that the job opening labor

turner survey data that Ryan, you just mentioned, the joltz, that big decline in unfilled open positions, I'm sure that overstates the case. I'm sure there's statistical. But regardless, I mean, That's like, very few changes in economic data are statistically significant. That was. That was. That was statistically significant. And my guess is a lot of those other unfilled positions that are still there that are kind of, you know, above what you typically see, they're probably soft unfilled positions. I bet they're going to, you know, start evaporating here pretty quickly, just like they did in the last month.

So it feels like labor, if I just, if I just, if I just, if I just, looked at the labor demand side of the report, I'd say, you know, it's pretty good. It's actually damn good, right? I mean, the labor market is throttling back in an early way and, you know, we're moving in the right direction. You take the trend lines by early next year will be sub-100,000 job growth, and that's consistent with, you know, unemployment moving north and labor market the pressure is easing and wage growth is long. But the problem, the reason why markets, investors are so anxious and why at the moment stocks are selling all long-term interest rates are up is labor supply, because on the labor supply, that was disappointing. Labor force

participation declined. Not a lot. I went from, you know, I think 62.4 to 62.3. So, and that's, that is not statistically significant. I mean, you know, that's bounced around. But unemployment then fell from 3-7 to 3-5, and everyone's now focused on, we need unemployment to start moving north to get that signal that wage, the labor market's becoming less tight, and that wage growth will start to moderate inflation could come in, the Fed could stop raising interest rates. And that's the disappointment in the report. So, you know, it depends on which part of the labor market an elephant you're touching, you get a different perspective on thinking and why it's so confusing. Does that, people, what do you think of that frame thinking about it?

Ryan? No, I would agree with you. I'm just confused about the elephant reference. Oh. The way, there's another zandism. Hold on way, you've heard that phrase, right? If I touch the trunk of the elephant, I think, like, blindfold, or I touch the rear end, I've got a different perspective on that elephant.

I got you. Okay, okay. All right. Dante, what do you think? I would agree with him. Oh, you would agree. You would agree with that. Yeah, I think everything you said was spot on.

Okay. Dante? Yeah, I agree. I think, you know, the jolts, the jobs openings data, it's just a little bit hard to make sense of right now. One, because you had such a big decline. You've had an even bigger decline over the last four or five months. You know, openings are down 1.8 million or so since March,

but they're still historically high by a wide margin. So you've had this huge reduction, but they're still incredibly elevated. And we've never had a period over four or five months where openings are coming in while job growth is strong. In the 20 years of data that we have on job openings, they've only ever really had a sustained decline when we're already in a recession, right,

when job growth is declining. So we've never seen, we have no historical precedent for this idea that we actually have labor demand, sort of getting pulled in without job growth also falling. And so I think it's hard to really understand what that means and if it is something we should take seriously. One thing I would add is that we still have that path to a soft landing for the Fed because I think how I'm kind of charting whether or not we're still on that path is looking

at the beverage curve, which is a relationship between job openings and the unemployment rate, and the Fed wants it to fall straight down. Yeah. And the Jolt's date is through August, so it shifted out. But with the decline in the unemployment rate, it likely moved back into where the Fed wants it to be. So we're still, it's possible. I'm skeptical, but, you know, there is that path to a soft landing. Yeah, Chris, that frame.

Yeah. No, I'd agree with that. I think that path is quite narrow. Very narrow, but it still exists. I don't know. And the labor market data is lagging here. So we want to, I think the openings is the more relevant statistic to be focused on. if measured properly versus the employment.

And the Jill's Day is not like that much. It's through the end of August. So it's only roughly two-week difference between the day that we got this morning, which the reference week includes the 12th of September versus the end of August. The issue is more the measurement, right? Hard versus soft. Is it really an opening? Is it not an opening?

Yeah, I'm confused by what you said, though. I mean, the job openings lead. job growth, the decline in the job opening. So what is that job openings are coming down rapidly. That's a positive sign. That's the number I would focus. If I have to choose between looking at the unemployment rate or payrolls versus the openings, I think the openings is the more indicative number at this point of where we're headed. Why isn't that suggested that that's consistent with a path forward where the labor market eases, wage growth slows, inflation comes in, and we don't have a recession, isn't it?

It's in that direction. It's not in that direction, but it's not enough, right? Even 10 million job openings at this point is far too much, right? So it's good that it's coming down, but I don't think it's enough for the Fed to change course at this point or ease up. Right. Right. I mean, do you, I hadn't, because I've been traveling, I haven't had a chance to dig deep into the job openings numbers. Was the decline in job openings, broad basis?

across industries? Do you know? Or was it concentrated? Yeah, Dante wrote up a piece on economic view about this. Yeah, it declined in almost every industry. Obviously, some declines were bigger, but I think construction was the only major industry where openings actually increased, which was a little bit surprising to me. But I think it was down everywhere else. Yeah. I'm sorry, everywhere else it was down? Okay.

Okay. I mean, one narrative would be that, you know, we saw this surge in job openings when the economy reopened about a year ago, a little over a year ago now, with the vaccination and the end of the, you know, the end of the worst part of the pandemic. I mean, it felt like every business in the country put up a help wanted sign at exactly the same time, right? Right. So that wasn't surprising. And then, you know, businesses are, you know, the labor market is tight. The unemployment rate is low. It's 3.5%. The employment to population ratio for prime age workers is 80% plus that's consistent with the strong economy.

So you keep those open positions open until it's clear that you don't need them. And that's what's happening like right now. It started happening at the beginning of the year. But like now it's, it's. very clear that in many of these industries, you just don't need those open positions. And they're evaporating here. They're evaporating as fast as they were put up. And if that's the case, then, you know, that would be consistent with, you know, the ability of the labor market to ease up here and wage growth to roll over. And, you know, we get, we get that path forward

without going into a recession. With the Fed having, not having to go on the high alert and we find our way have a soft land. Does that narrative? It's possible. Yeah. That's the narrative. It's possible, but I just think it's unlikely. In why?

It's a very, well, it's a, it's a very narrow path to fight inflation on the one hand, right? You're looking at the inflation data and you're going to hike because the inflation is still way too high. And have that calibrate sufficiently that you remove just. just the open positions without doing damage to the actual labor market, without actually having layoffs, mass layoffs. I just find that the likelihood of overshooting is quite high. Yeah, but go back to that narrative. That narrative is just centered around the pandemic and the pandemic.

And what was weird or what's unique is the fact that the economy was shut down, reopened, did all, everyone put up these open, you know, the help wanted advertise, open these positions up. And, you know, getting them back. They, they went from low to high in a very short period of time, a few months. And what I'm arguing is it's going to come in as fast. It's going to come in as fast. Because the, because you just don't need them now, you know, the economy is starting to slow in labor market. So those open positions are going to evaporate.

But we'll see. you're on your path, your narrative, we're currently going through that. I think Chris is just saying we're going to get pushed off that path pretty soon. Yeah. Well, if job openings are falling that fast, what's the mechanism that stops the free ball at the right moment? That's what, yeah. Yeah. So if businesses that worry, they're pulling back that quickly on openings, what stops that

ball from dropping past where we want it to? That's the thing I'm not sure about. It's because there's open positions weren't really that open. I mean, they're kind of sort of sitting there. They were just sitting there. I, because I had to put them up, I needed people to come back to work. I posted those unfilled positions back when the economy reopened. And they're just kind of sort of sitting there.

So it's not a reflection of a tight labor, as tight a labor market as you think it does. You see what I'm saying? Yeah, it doesn't need to layoffs. We lose the, these sort of like half position. Yeah. These quad-eye open positions, but then once we lose all those, then we stop. That doesn't mean the same thing, you know, as the fact that they rose to such a high degree doesn't mean the labor market was as tight as that would suggest.

Here's the other way of putting it, that the unemployment rate at 3.5% and the employment to population ratio at 80% is actually the really good measure of where the labor market is. It's not any tighter than that. That's how tight it is. And that's tight, and you've got to slow the economy. but that's kind of typical, you know, tight at this point, you know, when you're in a business cycle. It's not like excruciatingly tight, which is what you would conclude by looking at the number of unfilled positions.

That's what I'm saying. That's what I'm saying. So it's not, therefore, it's still a hard path. I'm not arguing that because even if it's typical kind of tightness, getting the economy to slow on Q is not easy. But it's not as difficult as it might appear by looking at those unfilled positions. that that that's the argument i'm making but we'll see here i don't know we're at the moment of truth we're at the moment of truth aren't we absolutely the next few months are going to yeah yeah i wonder if the old travels are coloring your reviews here well i did actually i've seen

extremes here you know overseas right i mean i go to the uk you go to the uk that is at one extreme. They're in chaos. I mean, of course, with the new prime minister, she came forward with this fiscal package that was deficit finance, tax cuts, and spending increases in a world where the labor market in the UK is arguably tighter than it is in the U.S. It's well beyond full employment by traditional measures, the unemployment rate. And, of course, a lot of concern about the economy overheating and then the fiscal sustainability of the deficit financing, given all the magnitude of the stimulus. And then, of course, the chaos that that triggered because of the rise in the guilt yields made life very difficult for pension plans here because of some

approach they took to managing their liabilities, you know, all kinds of, you know, unintended fallout from all of that. So complete chaos in the UK. But then I go to the G.C. the Gulf Coast, I was just in Dubai, and they're doing fine, no problem. Life is good. It cranes everywhere. So I've seen both sides of the global economy at this point. So you mentioned we're kind of like the next few months are really critical, but it's going to be difficult to separate the signal from the noise and the data because Hurricane Ian is going to cause a lot of problems with the employment data. Ah.

Yeah. The jobless clients are going to spike. Yeah. They're going to spike. But you can separate that. You can do like UI, U.S. minus Florida. But, you know, it's going to just add some volatility. And like, you know, it's going to make the things a little bit messier to interpret.

What about these job numbers will affect? Because it's by the survey week, which is next week for the month of October. Right. Yeah. Is it going to live jobs or hurt jobs? Or let's see what UI does. Okay. I was going to hurt a little bit.

I mean, the timing is more, you know, it's not going to be as big of an impact. It would have been if it hit now or a few days from now, but I think it's still going to have a negative impact, at least in Florida. In the past, yeah, in the past, we've looked at, you know, the timing of storms. If it hits during the reference week, it's significantly disrupted to the employment data, but it hits before. It's less. It still leaves a mark, but it's not enormous. But back to your opening point, it may artificially make the employment numbers look a little low next month, which may may make us too optimistic, right?

I mean, that's actually what we want to see. So it may be a false sense of security that the job market is slowing more than it actually is. You don't think the reconstruction will be kicking in by then and that will create jobs? Just clean up. Yeah, it would be a little bit longer, I think, before that starts to really manifest. Right. Yeah, because are any, I guess, tourist spots are disrupted. And they won't, I guess there will be layoffs there.

and those folks won't be back to work in time. Right. Yeah. There's going to be some business closures. Yeah. I mean, the BLS made a mention that it didn't affect this, which isn't surprising after the reference week, but they put a direct message in the report about Ian. Right.

Right. The Fed meets before the next employment report, though, right? That's, they meet. November 2nd? Yeah, I think it's the second. Yeah. That's true. They won't have this BLS.

That's right. Next four CPI numbers. They'll have ECI, though, for the third quarter, which is the end of October. Yeah, I think that's more relevant. And if you look at the quits rate, the ECI is going to be strong. Yeah, everyone to explain that, Ryan? Yeah, so the quits rate does a pretty good job of, you know, predicting what the employment cost index for wages is going to be in the following quarter.

Because if you look at the Atlanta Fed wage tracker, where a lot of the wage growth faces for people that are quitting their jobs and in between jobs and things like that. So that's where we're seeing the strongest wage growth. And that, you know, with a quits rate this elevated, the Fed's going to continue to press hard on the, on the break because they need wage growth to slow to pull down the demand inflation that we're experiencing. So. But I'm with you, Mark. I don't know if your view has changed, but our inflation problems are still on the supply side. And that's, the Fed can't do anything about that. Well, I mean, they got to get labor, well, I mean, they can't get labor demand down.

And they can, you know, I mean, even objectively speaking, labor demand is still strong relative to kind of trend labor supply. I mean, trend labor supply is 100K per month, roughly, in jobs. And we're creating even today, even in the month of September, 260K. So objectively, they can get that down, right? That's that they're working to do. But I think there's some good signs on the. supply side. So, you know, the supply delivery times and the ISM manufacturing survey came in, and that's just another indication. Shipping rates are come down a significant amount in the last

few weeks. So that's a sign that the supply chain stress is starting to ease. We should get some more good disinflation over the next few months. Yeah. Which we need. Yeah. Well, we definitely need. So Ben you have oil. What's that? Then you have oil, right? OPEC cutting, right? All the prices going back up, gas prices going back. Well, let's go, maybe we complete the discussion around the jobs and then it was turned to a wall. But, you know, I, when I saw the numbers this morning and I was on a plane, and thank you, Ryan, for sending me an email on the plane because I couldn't get on the internet to see it.

I thought, oh, you know, it wasn't, you know, I thought the markets would be kind of mixed, right, because of the laborer demand is very positive from a market perspective. and labor supply is negative. I didn't expect this negative react, this strong negative reaction from markets, at least are land. Of course, it's early in the trading day,

and we'll see how it ends up, but nonetheless, I was a little surprised by that. It's also after some rallies earlier this week, right? Okay. So it's just normal market volatility, but you're saying. It might be giving up some of the gains.

Random walk. Yeah. Right. Okay. All right. Well, I mean, at this point, And if we continue to see job growth throttle back, so, you know, end of this year going

in the next, we're around 100K, and, you know, unfilled positions continue to move south, as they have been since the beginning of the year, no more, no less, and the quit rate continues to moderate, still very high, but it is more or less moderating if you look through the monthly volatility. I guess the next thing that has to happen, which hasn't happened, goes back to your point about wage growth. That has got to roll over. If we're thinking about this in the context of the Fed's path, the path to inflation back at Target without having to go into a recession, that's the next thing that's got to happen here.

We've got to see that those wage growth numbers start to throttle back. Okay. Anything else on the job numbers? You want to call out? I think we covered a lot of ground. No? Again, outside of the current situation, that it was a good report. U6, the broader unemployment rate is back down to its all-time low.

The demographic unemployment rates are quite low. Black unemployment is down. So there's a lot to celebrate in the report from a household perspective. Right. Right. So the market remains strong from that standpoint. Yeah. Yeah, if I'm a worker thinking about I've got a job, but yeah, it's a positive. But in the current context, it goes back to that mind-nimming, good news is bad news. Bad news is good news, you know, kind of thing. Okay. That's right. Yeah, let's talk about oil a little bit, because that obviously is also very important to the inflation outlook and what the Fed's going to do. And the big news here, and I was in the GCC and the Middle East when they a OPEC Plus decided to cut its quotas.

You know, did you guys have a take on that? Do you have a view on that? I mean, I pretty strong comments coming out of the administration and other politicians in Washington. Do you guys have a perspective on any of that? What's going on there? Chris, do you? Yeah.

I mean, I think it's, obviously it's, everybody looks out for their own interest, right? So the fact that they cut is not terribly surprising. Oil producers want to keep oil prices high, obviously. You could say it's a reaction to the actions taken by the U.S. in terms of the Strategic Petroleum Reserve releases there, right? From the oil producers' perspective, they might look at that as manipulating the market, and they're just responding to that increase in oil on the market with reductions on their side to keep the price elevated.

So I'm not shocked by the actions here. Obviously, it's not in the U.S. interest for these prices to remain high, but for the OPEC producers, it's not unexpected that they took this action. That's my take. I would concur with that. I thought the, I guess I can understand from a political perspective why they might get bashed, right? Because obviously this means higher gas and lien prices, and that's politically charged, particularly as you move into the midterm election, which is less than a month away. And there may be some political aspects to what OPEC did, OPEC plus did. But it feels like, I agree with you, it feels more just self-interested. self-interest. I mean, oil prices were coming in, right? We were closing in on $80 a barrel a week ago before all this talk about an OPEC plus cut came to the fore. And I don't think that from a OPEC perspective, a Saudi perspective, a UAE perspective, that they, you know, I think they feel more, they feel like it's in their best interest of oil sitting around 90 as

opposed to 80. Because 90, I get obviously more revenue, but I'm not killing demand. I'm not going to crush the global economy. But that's kind of the sweet spot, you know, for prices. So if, you know, you look at it from that perspective, their perspective on trying to maximize their revenue, which, you know, that is what it is. 90 seems about right. So they cut quotas. And, you know, you can kind of calibrate it because they announced cut was two million barrels a day. So they're going to cut quotas by two million barrels a day of production. But because many of the OPEC members weren't producing at their existing quota, the actual cut in output is closer to a million barrels a day. Exactly. A million. And if you do kind of our rule of thumb is every million barrels

a day is worth $10 on a barrel of oil, what they did is they took oil from $80 a barrel to $90 a barrel. So that's what they did. And it just feels, again, like, if you're sitting in their shoes, they're standing in their, what's the phrase? Standing in their shoes, right? Standing in their shoes, you kind of sort of get it, right? That's what you would do.

Dante, you're shaking your head. Do you have a different view? No, I agree. It makes sense. I mean, you know, from that respect to sense to me. Yeah. Here's the other. It's a small amount off GDP growth in the U.S. though.

It's more about inflation, though, is it? Oh, no, I agree. It's more about inflation, but it's not about growth at this point. I mean, in the U.S. is a major producer, right? So, yeah. They're beneficiaries in the U.S. from higher prices as well. That's a good point. Right.

I mean, if you look at our model or model of the global economy, if you shock it by $10, you raise oil prices by $10, what does it do to GDP in a subsequent year? I think it's about a 10th percent of all, right? Yeah, so pretty minor. But it goes right to consumer sentiment, psychology, it goes right into inflation. You know, we've seen inflation come in because of the lower oil prices and food prices, and now it's going up, so it doesn't feel very good. I will say, though, in our forecast for oil prices, and here I'm focused on West Texas,

intermediate, we have been assuming $90 barrel oil, you know, through this year going into the next. So our forecast is not changed. And now we didn't exactly forecast OPEC cutting like this, but OPEC didn't cut. Then other things would have happened to keep prices up. So, you know, I don't know that it's, even with this move, it's far off of what, you know, we were thinking at least in terms of the pricing going forward. So.

And here's the other thing. This all assumes the global economy doesn't go into a recession. recession, right? I mean, if the global economy goes into recession, and it's not, it's not in recession, at least by our calculation, it's close, but it's not in recession. If it goes into recession, global demand will weaken, right? And you'll get prices back, you know, even, it'll be in the 80s again, you know, not 90. So, okay. All right. It's, I mean, obviously not great, you know, from an inflation perspective and trying to land that plane on the tarmac, you know, It makes the landing even more difficult.

But I don't think it's very different than expectations. The expectations we've been having, we've had all along. Okay. Let's play the game. Let's play the statistics game. And I've been recently relatively unprepared for this game. We'll give you a mulligan. Well, you will give me a mulligan?

Oh, yeah, when you're traveling this much, around the expectation, the bar is lowered. The bar is lower for me. Okay, I'm good with that. I mean, the bar is raised for Dante since he's been, yeah, but for you, we can lower it. Crunch the numbers, right? And Dante, you are prepared, right? You've been thinking about that.

I've been a number, yeah. Okay, you've got a number. Okay, good. All right. So the game, statistics game, we all put forward to statistic. The rest of the group tries to figure that out with the clues, questions, deductive reasoning. The best statistic is one that's not too easy, that we all get it so quickly. You guys got the Cal Bell ready just in case.

not too hard, there you go, not too hard that, you know, we can't get it. And it's got to be apropos, it doesn't have to be, but it'd be nice if it's apropos to events, you know, what's going on now, recent statistics. So with that, let me turn to Dante. Dante, you're going first for everything in this podcast. What was your statistic? It is minus 2000. Okay. Is it in the employment report? It is in the employment report. Is it in the payroll? Sure. Yes. So it's a change of job growth in the industry.

Industry? It is a change in industry jobs, yeah. So some industry lost 2,000 jobs in the month of September, and you want us to figure that out. That's your statistic. It's important, yeah. It's important for labor supply conversation. It's job care.

It's employment of job care. I feed it up for him. He said he's traveling late. That's impressive. Wait, wait. These other two guys didn't get his. fast as I got it, though. Yeah, we were going to get there.

Oh, yeah. Well, maybe five minutes down the road you get there. Yeah. Come on. All right, all right. Okay. Yeah, it was a half. I'm surprised Mark didn't travel with his cowbell.

You know, I did travel with my loom cube, but I couldn't put the cowbell in there. But, uh, what's a loom cube? You don't know what the loom cube is? LoomCube shines a light on your face. So if I do a TV interview, I can do TV interviews from anywhere. In fact, I did one yesterday. In CNBC, Arabia, I think they call it. In Arabic, not that I speak Arabic, but it was translated.

So it was pretty cool. In fact, the hardest, I did an interview with CNN, the hardest interview I did all week with CNN, it was about the OPEC cuts. And the first question was, do you think that OPEC is weaponizing oil? That was the question. I go, oh, go. That's a good way to start an interview. A good way to start an interview.

I'm afraid to go back and look at what I said. But anyway, okay, why did you pick that number? Why that statistic? Yeah, so obviously we've been talking a lot about labor supply as the big thing that we're sort of waiting to see come around. And one of the issues still out there is that, you know, employment and child care services is still something like 8% lower than it was before the pandemic. Yeah, there are still shortages in available child care for parents who are looking to get back to work. Yeah, I think we know from other data that there are some people out there, right? The number of people that are out of the labor force but want a job that is still elevated by, you know, I think 800,000 relative to what it was in early 2020.

So there's still some set of people, you know, whether it's a half a million or a million people that are, you know, sitting out there saying they want a job. there's some reason they're not coming back. And I think one of those key reasons is still, you know, child care issues are, you know, are still problematic for a lot of people in terms of costs and availability. And those are obviously directly linked to one another. So we had seen some improvement in child care service employment. And, you know, it's not a big pullback in September, but it's moving in the wrong direction in terms of providing any support to, you know, labor supply. Yeah, I got distracted there for a second. I may have missed it. But what's going on? Why, why can't these child care facilities,

centers stand up? I mean, is it simply can't find people at the prevailing wages? Is that what it is? Yeah, I assume it's a combination of, you know, there's obviously no flexibility in work arrangement like a lot of other jobs can offer. You have to be there in person. You'll be around potentially big children, you know, wages are not great. They've improved, but they're still not great relative to other available positions. And I think given how many job openings we still have, there's just a lot more competition for a limited pool of workers. So, oh, that's interesting. I didn't think of that. I know in times past, you look at labor force participation by different demographic groups,

and you looked at the participation rate of young parents, and both male and female. And that was, they did decline quite a bit, and it wasn't until schools reopened that they sort of came back. And that was about a year ago now when schools really reopened in September of 2020. have you looked at that data recently? Do you know what I say? I have not updated it recently now.

I mean, it had come most of the way back, you know, not long after schools broadly reopened. I think there was still a little bit of weakness across parents, particularly of young children, you know, sort of less than six years old, which would, you know, point to the sort of daycare story, more than the school reopening story. So I think there's probably still some evidence there, at least the last time I looked at, you know, daycares in particular, we're still having a little bit of an impact on the ability of, parents to work. But do you still think

going back to labor force participation, you know, it's down about a point from a pre-pandemic. Do you think, suppose there was no issues with child care and parents finding the help

they need, how much would that really add to the participation? We're not talking to half a point, or are we? We're talking like a tenth or two, something like that. Yeah, I would lead more towards a 10th. I think it's, It's one of the factors. It's not sort of the majority factor by any means, I don't think. Okay.

If you look at the, I'm looking at it right now. The female labor force participation rate was 56.8 in September. Pre-pandemic, it was 57.9. Oh, okay. Overall for women, though? Overall. I actually look at prime, but. Yeah.

Or, yeah. But primate women actually hit an all, it was close in all time high. I think we, that might have been last month. The participation rate. Yeah. So, yeah. We're probably some evidence that, you know, it's not having a huge impact anymore like it was.

Yeah. In the early days of the recovery. I think it's still a factor to consider. Still a factor. Yeah. Okay. Is that, it's not. Oh, go ahead.

Go ahead. Oh, prime age, female labor force participation, September, 82.7. Re-pendemic 83. Oh, so pretty close. We're really close. Yeah, really close. Okay. And as I recall, one thing that surprised me about that work you did was that participation rate by men, male parents of young children, was down a lot, too. At one point, as much as it was down for women, females. I found that surprising. Yeah, it actually seemed,

if I, you know, remembering, there was a difference in timing. You know, at the very onset of the pandemic, like women, mothers got hit much harder, but then it seemed like over sort of the first year of the recovery that sort of, you know, they improved, but actually, you know, male parents started to pull back a little bit. So it seemed like there was some switching behavior there, just some difference in the initial impact versus sort of the slightly longer term impact of job losses. Yeah, a little bit different for men and women. Yeah, and I don't know if I said this earlier, but I'll say it again if I did. It feels like to me we can't count on any improved significant improvement in participation, that we're down a point from pre-pandemic.

If you go back pre-pandemic and look at the forecast we were making and others were making for Labor Force participation now, two and a half years later, we had participation down. I don't know if it was down a point, but it was down pretty close to a point, I think. So we expected it because primarily because of the aging out of the baby boom generation out of the workforce. That was going to happen, you know, pandemic, no pandemic. If you look just at the forecast of the actual size of the labor force, though, we're still in a pretty big hole, right? I mean, it's recovered to the pre-pandemic high.

But if you look at our forecast back at the end of 2019 for, you know, today, I think we were expecting two and a half, three million more people to be in the labor force than there are currently. Yeah. You're right. Yeah. The rate, the precipitation was coming down, but we were still below what we would have expected in terms of overall labor force size. No, no argument there. No, I'm just saying it's not because of participation. That goes to working age population growth.

And that probably goes back to immigration, right? True. Yeah. And actually, until today's numbers, I mean, had a chance to look, but over the past almost year, there's been a very significant increase in people that are foreign-born that are in the workforce and working. It feels like immigration is starting to pick up again.

But it maybe fell back. It might have been somewhat statistical and fell back a little bit in this month, given the data I haven't had a chance to look. But it felt like we were starting to see some improvement. In fact, labor force growth year over year. I don't know. Maybe Ryan, you can look for this month. But last month, the month of August, it was close to 2%. And that's not that, that's pretty good for, you know, for labor force growth.

Usually it's half a point to a point in a more typical time. So that was strong. But maybe we could take a look. Okay, Chris, you want to go next? Sure. 1.7. Are you sure? 1.2?

Yes. You hesitating? Debating to give you a softball or a softer ball. Oh, so this is a softball but not a softer ball. Yes, yes. Okay, 1.7. 1.7. Nope.

Oh, do you want units? No. I tell you units. Oh, you don't have to. It's not 1.7 widgets, though. something economic. Is it something? Yes. Is it in the employment numbers?

Yes. It is a market related. But not today's jobs numbers. Oh, no. So it's jolts. Yes. Or something you calculate. Oh, it's jolts.

Yes. Yes. I think Dante's got it. Oh, it's the unemployed per job opening? Yes. Yes. Softer ball, right? That's, that, yeah.

I don't know. Well, employees say it's down. It's down for unemployed worker, right? Yeah. Yeah. All right. So this is, so explain what it is and why you picked it? It's the number of job openings per unemployed worker.

Okay. 1.7 is still a high number. Prior to the pandemic, it was 1.2. So it got as high as two job openings per worker. And now it's come down to 1.7. So it's still elevated. There's been some academic work to suggest this is the most, relevant number in terms of assessing the tightness of the job market and that this number has to

come down back to that at least to that 1.2 level. So we still have a long way to go. So we lost 1.1 million job openings as we discussed earlier in the month of August, but we need several months like that to get to something close to 7 million, which would be consistent with this with this ratio. Yeah. Yeah. What was the peak for the ratio? Do you know?

It was well over two probably. 11 million. Right at two, I think. Right at two, yeah. And you're saying 1.2 is historically consistent with the full employment? 1.2 is what we had prior to the pandemic. Okay. And as you recall, that was already, we already were thinking that was high, a hot market.

So probably something closer to one is, I, deal. I deal. Right. Right. Well, I tell you guys, I have this sense that that number is going to come in fast right here. I just think it's coming in, just based on, you know, businesses are now nervous about recession. They're hearing recession, recession, recession, and they're growing cautious.

And you're going to pull those job positions pretty quickly. So the fact, that one million, and again, that might be a lot of. be overstated is indicative of all the other millions that are very soft opens, and they're going to evaporate here pretty quickly. Yeah. So you want labor force growth? Yeah, what's labor force growth? What do you think it was?

What? Through the month of August, year or year, it was close to 2%. Yeah, September was 1.99, so 2%. Okay. Okay, but that, okay, now going back to labor supply, that's, that's. That's really strong. Yeah. If you look like before the pandemic, it was eyeball in the transit.

No, no, no. I mean, before the pandemic, trend labor force growth was half a point to no more than a point percentage. Right. Working age population was growing no more than one. And participation had, you know, that topped out. So high end labor force growth was one, and we're now at two. Right? That's pretty good. Yeah, when wage growth is this strong, it pulls people in.

Yeah. Well, yeah. Yeah, but okay, so we got weakening labor demand. We still have reasonably good, I mean, I'd say strong labor supply. And so that suggests things are moving in the right direction to ease this labor market, allow wage. And the next step here is got to be wage growth rolling over. you know, that's got to happen. Okay. All right. The more I talk to you guys, the more optimistic I'm getting.

Oh, geez. That means something's going to be wrong. Maybe it's just me talking myself into the optimism. I don't know. That's funny. All right. Okay. Well, that was a good one.

That was a good one. Okay, Ryan, you go next. All right. Well, this is a perfect segue. One number seems optimistic, but reality is a different number. So 2.2% and 0.4%. 2.2 and 0.4. So one's easy, one's a little bit harder.

Labor market related? It is not labor market related. Oh. Oh. Okay. But this is important. Is this an economic statistic that came out this past week? Yes.

Well, we, uh, oh, I don't want to give you a hint, but he's not sure. No, it, no, it came out this week, but it's, It's not a Yes. It's not a release. It's not an economic release. Okay. That's okay.

So thank you should get able to get this. Really? And 2.2 is a positive of the point four is a negative. They're both positive numbers, but one looks. Yeah. There's 2.2 looks good, but in reality, 0.4 is where we are. I'm giving you really for a big hit.

Oh, wow. Yeah. This really is not a release. This is like Alice in Wonderland. It's not good. What's he saying? Is it inflation related? It is not.

Okay. It's a number you ask about. It's the number I ask about so many numbers. That's the problem. I know. It's like I'm constantly asking about numbers. Okay. out in the last seven

or you derived it within the last seven days I guess is it oh is it derivation your derivation it is not you derived it

you calculated it you calculated it okay okay I know as soon as you say it I'm going to say oh yeah that's right is it

a market financial market variable it is not financial market very well. Okay. Okay. Commodity related? It is not. It was closer to one this time last week. Oh, geez, Louise. Come on, Dante. You should know this. It's the last week. So it's a big number? It's a daily number. It's a daily number. Oh, wait, wait. Come on, Mark. Wait, really? Okay. Is that something you know of the inflation expect? No, you said it's not inflation related. It's not, oh, it's a bond. It's not inflation expectation.

If you open up economic, it's plastered right there in a big blue circle. Oh, I know what it is. I know. High frequency, GDP, yeah, GDP. GDP. So our tracking estimate for third quarter GDP went from 1% to 2.2%. But the reason for the increase and why it's misleading of the strength is that it's all trade. So the trade deficit really narrowed in August. And if you exclude trade exports, GDP's really tracking 0.4%. So just like a we discounted the drop in GDP in the first time of the year because there's a big swings in inventories and trade. We kind of have to discount the strength in Q3 because it's all trade related.

I read that piece he wrote. All those numbers sound so familiar now and that's why. There you go. It's interesting. So basically the GDP has really gone nowhere, you know, since exactly all year. All year long. It's just basically flat. That's an amazing thing.

Okay. And, but the reality is GDP in Q3, and now we're into October, we're going to get more data, but it feels like it is going to come in positive. It's going to come in positive. It's going to come in around 2%-ish, something like that. We got more good day to go. But some of the weakness is starting to broaden out. Weak productivity story, right?

I mean, it's. Oh, yeah, yeah, yeah. Absolutely. Yeah. Yeah. Sounds like something like... Ouch. Ouch.

It's inside, uh, comment there for barb. That was a barb. That was definitely a barb. Because Dante is a productivity skeptic. And Chris is a productivity optimist. Optimist. Right. And he's not looking so good.

He's not looking so good. Okay. All right. I got one for it. Mark. Let's see that one. I got one. for you.

I'm not sure. I'm going to give you a number to make it a little harder. If I give you the exact, I'm giving you a little bit of a hint by telling you all this. If I give you the exact right number, which I may have to do if you found her here. So wait, wait, you're giving us a wrong number? No, no. I'm going to round. I'm going to round.

Okay. Okay. It's a rounded number. There's a rounded number. And the rounded number is 30,000. Employment related? Employment related. It's in a sector of employment.

No, it's not in the jobs report. Not in the jobs report. Not in today's employment report. Is it in Joltz? It's not in Jolts. The job opening labor turner. Oh, is this Challenger layoffs? Yes, it is.

Ding, ding. He gets a bell. It definitely gets a bell. Yeah, very good. Gets it a cowbell. Wasn't it 26,000? No. It was 29,000.

It rounded. 9809. you can see why I didn't want to say that because if I said that, you would have gotten it right away, probably. Yeah. So I don't really, do you pay much attention to the layoff announcements,

the Challenger layoff announcements? Do you look at them? Yeah, I look at them. It doesn't factor into like the employment models because these are announced layoffs, not necessarily layoffs that have occurred. And businesses can change their plans. So they can announce 29,000 layoffs,

but only go through with half of all. Yeah. I'm with you. I'm beginning to think, though, we need to pay more attention to that in the current context, right? Because the next thing that's got to happen is layoffs, more layoffs. And again, that sounds really weird to say. It's bizarre, you know, say that. Good, you know, bad news is bad news. That's kind of sort of what we're saying here. But layoffs are just incredibly low. You saw that in the initial claims for unemployment insurance. They're hanging around 200K. I think our rule of thumb is 250K per week is consistent with a healthy good economy. You know, not too tight, not too cold. We're at 200K. Is that right? 250K. Should we put that stake in the ground? Is that is that the number we should be using 250K on UI claims? Ryan? So when I estimate the break-even. I mean, I think you're right, 250 is a healthy, like we're creating jobs. Healthy. Yeah. So that kind of line in the same where claims are consistent with no monthly

job growth is closer to 280. Okay. Okay. Yeah. I would agree. 250 is good. 250 is kind of the, you diswrite. Right.

Sorry. But 200 is like, that's too. That's no layoff. Too low. Very tight. And the layoff announcements, even though you're right, they may not translate and depends on timing and everything else into that might be worthwhile as a leading indicator in the current environment where business.

are growing more cautious where they're pulling unfilled positions, the other thing that you would happen, you'd see more announced layoffs. And we actually, that 30,000, or 29,989 to be precise, in the month of September was pretty high, you know, by recent historical standards. It's been incredibly low. I think you take, you add up all of the layoff announcements so far this year through the month of October. It's a record low, you know, 10 months into a year. But that number that 30,000, that's pretty high. And so if we start seeing, I would expect to see more of that as businesses are growing more cautious here and worried about recession, and that would be an indicator that, you know, we are starting to see a more normal, at least a more normalized level

of layoffs. And that would, again, be another way to get job growth down into that sub 100K that we need to get unemployed moving north and taking the pressure off of wages and ultimately prices. So I think we might want to start focusing on. Is there another source of layoff announcements? I think there is. You get the, what are they called? Warren reports? Yeah, we might want to take a look at that. You can monitor those. Yeah, I'll start monitoring those to take a look at that. Are they by state?

Yeah, right, you're required to report to the state, some state office if you're planning to lay off above a certain. I think it's above 50. There's some thresholds. If you're going to lay off five people, you don't have to file a warrant notice. But if it's above a certain threshold, you have to file with the state. Yeah. Those layoffs are concentrated in tech and retail, right? Yeah. Health care, I think, too, a little bit in health care. But you're right. Most of tech. Which is consistent with the layoff announcements, right? The tech companies have been, you know, up front. But yeah, I talked to a lot of the Bay Area lenders, and they have a very different perspective than the national view. When we talk about layoffs in the job market, they're seeing, you know, because. tech industry is right there. Yeah. Yeah, you're right.

And they see that's where house housing have been most affected, right? Exactly. So that's what they're saying is that there's definitely a regional concentration. Right. Of these layoffs.

Right. Okay. Why don't we like whenever I say it's going to be a short podcast, it never is because I have so much, we have so much fun talking about the numbers. but you know it is getting a little late in the day here in Singapore I'm coming up on midnight and by the way I have not eaten dinner so I'm like and I got all these snacks I got pistachios right here I got a fruit and nut bar from London I got some dark chocolate I took off the from London did you uh did you declare that that the order there did I need to no it's a good item I think yeah well this is like this is like a pound or something well now, you know, this is, this used to be like, you know, took three bucks.

Now it cost me a buck, you know, because of the, the dollar is so strong. So actually, I bought two of them. Here's the second one right here. But we probably should wind down this conversation. Are you going to be able to find somewhere to eat at midnight? Well, you know, in fact, yes. Singapore. Singapore.

City then never sleeps. I can get something. Oh, that's good. Yeah. We'll see how that goes. I got a 24-hour gym, so I'm contemplating should I go run before I have my dinner. What do you think? Would you be, would you think less of me or more of me if I went for a run before dinner at midnight in Singapore?

What do you have scheduled for tomorrow? Oh, actually, interestingly enough, you know, Steve Cochran, our good colleague is here in Singapore. He manages our Asian. He, who and I known him for 30, 30 years. He was, he calls himself 007. He was the seventh employee. of a regional associates that, you know,

it's the precursor to the, to our company now. And we're going to, he and his wife and I are going to go to the botanical gardens here in Singapore. So, oh, those are famous.

You have to go on your plate. And what's that? Yeah, then you got a whole free day tomorrow. You got to go for a run. Okay, I'm going to go for a run. Well, it depends what time they're going to go to the gardens. Nine, nine a.m.

He starts early. Oh, no, go to bed. Nine a.m. You're insane. now. That's funny. We'll see how wired I am. But we're not done yet.

So yeah, we got more to go here. I want to know two things. First is where do you think the terminal rate for the funds rate will be? Terminal rate being what is the highest the federal fund rate is going to get? Bonus, if you can tell me when that's going to be and how long it's going to stay there. And then I do want to hear again, your. probability of recession over the next 12 to 18 months. So we should reprise that. And should I start with the most pessimistic person on the podcast?

Okay. Let's get it over with Ryan. How are the most pessimistic? No, Chris. Chris is the most pessimistic. No, Chris's recession odds are higher than mine. No, come on. I don't. Is that right? Are you sure? They might be. They might be. All right. Let's go with Chris. Chris. Okay. So what do you say, first give me your your Fed forecast and then give me your odds of recession.

All right. Fed forecast four and a quarter to four and a half percent. Oh, wait. That's less than what markets are anticipating. Correct. I don't think they'll, Oh, you think the economy's going to break before we get there.

Yep. Oh, my gosh. He is, oh, Lori, you are pessimistic. Okay. Realistic, I like to say. So you think a recession is going to start like imminently? first quarter.

First quarter. That's pretty soon. That's pretty easy. It was two months. Well, it could be at the end of the first quarter. I'll give you some hope. End of the first quarter.

Maybe we have five months instead of two or three. When do you get back to the U.S.? Me? I get back a week from now. Week from Saturday. I come back. I don't say recession is going to start right around then. Yeah.

Trouble seems to follow you everywhere. Exactly. I'm trouble. I'm trouble. Everywhere I go. Oh, geez. You know, I should write that up, shouldn't I? That would be good.

All right. Oh, what's the problem in a recession then? Over the next... 70% in the next year? Well, you're saying in the next six months. Yeah, yeah. I'll give me some... I'm giving you some slack.

Yeah. 70% over the next 12 to 18 months. Let's say through the end of 2020, just around it. So 70%. Okay. I'll keep it there. Yeah. 70%.

So Chris, let me ask you this. You would, oh, did I lose you? No. I'm sorry. I hit the wrong button. You would change our forecast to a baseline forecast to have a recession on it now. I would. You would.

I mean, you're already getting pretty close there. I think we have first quarter going negative. It's not a lot. Not on jobs, though, do we? No. We have unemployment creeping up. Yeah. Well, on year-over-year basis, GDP goes basically, it might go a little negative, actually, in Q4Q1, given the weak GDP in the first half the annualized.

Yeah. At least that's the last I saw. No. We have jobs going negative, though, in the forecast. No, I'm sure we don't. Yeah. Okay, interesting. All right.

I'll go, Dante. Do you have a view on the Fed? Yeah, I think I'm in line with the market. I think four and a half to four and three quarters. I think that makes sense to me. That's the terminal rate. The highest is going to get, and you think it stays there all next year? My recession odds are pretty high, so I'm not sure it stays there all next year.

Oh, okay. What's your recession odds? I'd probably go 65%. I'll hedge a little lower than Chris, but it's creeping up from a few months. You would change the points on forecast. Not today. I'd probably wait another month or two and see where we are. I think a little bit more information would be useful here.

Okay. All right. I hear you. Okay. And Ryan? There's no collusion, but I'm exactly with Chris. 70% probability recession, 4 and 4.5. They can't get any higher. Well, okay. So wait. They're going to raise the funds rate. Well, you tell me what they're going to do with the funds rate here in November? 75. What are they going to do in December? 50. What are they going to do after that?

is what you're saying. That's it. That's it. So that means we're going into recession early next year. Correct. That's what you're saying. Yeah, I think they're going to see the economy's really slowing down in the second. And late this year, early next, pause at four and a quarter or four and a half.

Leave it there for an extended period of time until it's very clear that the economy is in a recession. It sounds like they only, but you don't, you, they're the only reason they would stop is if it really, looks like either two things. The good thing, inflation's coming in, or second, what you're suggesting is the economy's falling apart. So you're saying the economy is going to be falling apart early next year, is what you're saying. Yeah.

That's what the implication. I would put a recession. I would put a mild recession in the baseline. Okay. Well, beginning in Q1? Wow. That's what it sounds like you're saying. Yeah.

It's like the first half of the year. Yeah, but okay. Well, how's that consistent with them not? So they're not going to tighten it after December. They're going to stop. I don't think so. Okay. But if I'm wrong, and they keep tightening, then the odds of a recession go up even higher.

So what's your probability of recession? 70. 70. And you were there last time we chatted about this, weren't you? I think I was 65. Chris, you were 70? You were at 70. You went back to 65 and now.

I'll back up to 70. Oh, man. Did you see Chris's chart with the leading indicators? No. Oh, you mean his, no, no, I'm not sure. The six-month decline? Chris can elaborate. Client and leading economic indicators.

Oh, that one. Yeah, we want to explain that, Chris? That's it. Percentage change over six months of the leading economic indicators produced by the conference board. We've never had a, we've never got we've never not had a recession when the um when that change is as large as it as it is now right right so that those leading economic indicators are signaling high probability of recession

going forward and that's the i guess the yield curves in there the stock markets there housing permits housing oh yeah housing permits yeah it's a yeah it's an amalgam of yeah a number of different Oh, man. And there's weakness all around, right? Yeah, yeah. Well, by definition, there's got to be weakness, right? We, you know, we, is it, it's got to spoil. You're saying it's, well, it's by design.

It's by design. It has to happen. Otherwise, you can't get inflation down inflation back in. That's right. Oh, that is so. And what we're debating is it doesn't go too far, right? Yeah. You're arguing it's a controlled weakness.

We're not in free fall yet, right? That's your, yeah, it doesn't feel like free fall to me. I say four and a half to four and three quarter terminal rate. So three quarter point in November, half point in December, quarter point in February. Those are the meetings. And then you're four and a half to four and three quarters. And they just hang out. Isn't there a meeting in January?

Yeah. I thought it was February. That was me in January. Oh, it's late January. I think it's late January or so. Late January. Yeah, late January. Yeah.

I think you're right. And then they hang out there. and take a look around, see what's going on with wages, what's going on with inflation, what's going on with jobs, you know, things that they're focused on. And if everything is coming in, that's the end of the story. And that's what I would consider to be the baseline, no recession. It comes close. It's going to feel uncomfortable.

Unemployment's going to move higher, but we don't actually go in. We don't get the kind of job loss you would need, I think, to, characterize the environment as a recessionary environment. You know, you might see a month or two or three with job loss, but it's not going to be persistent three, four, five million job loss. I just don't think you're going to see that. So do you think we're going to get an inverted policy curve, so the 10-year minus the Fed funds? Well, I think there's a reasonable chance we don't. Because if we do, that's just one more indicator. Then every single indicator I know would be signaling, you know, recession, except for the, you know, the kind of, that's all, all the long leading indicators

would suggest recession. Consumer confidence doesn't suggest recession within six, that's three, six months, and that doesn't suggest recession in three, six months. And certainly unemployment rate doesn't suggest recessions. Like, you know, that the other, of course, you did a great job. What was it? If the unemployment rate rises by more than a half a point within a three-month period, then we're in, right?

Over a year, right? Half a point over a year. Oh, is it half a point over a 12 month period? Over 12 months. 12 months, okay, over 12 months. That's really confirmation that we are in, right? Yeah, we're in. That's not a leading into-

recessions, though, right? Very accurately. That's right. The start, yes. It pegs the start of the recession, the month, very, very accurately. Right. So that's not signaling anything. But that's going to be late to the game, right?

But at the time we get that. So we're talking about kind of long lead. There's intermediate lead. I say confidence is intermediate lead. And I'd say the unemployment rate is no lead. It's just we're in recession. Yeah. But you can see the unemployment has to start rising to get it up a half a point in a year.

Right. So we can see it headed in that direction. And right now it's not headed in that direction. That's right. I mean, it's going in the opposite direction. You know, it went down to 300 percent. Yeah, I'd say, I'd still say 50-50 over the next 12, or say through the end of next year, you know, 50-50.

So, and then, so the narrative is the Fed pauses after the early, the hike in early next year. They hang out. They'd see what's going on. and they'll get confirmation at that point by summer of next year that the wage growth is the job market is moderating, easing up, wage growth is rolling over, inflation is still coming, is going to keep coming in. So all the things that they, inflation expectations are well anchored. They remain well anchored like they are right now.

And it's going to be painful. It's going to be close, but we don't get the kind of job. Again, the job loss that I think you would need to characterize the environment as a recession. It may come down to just a judgment call as to what is a recession, you know, this debate we've been having, what is a recession? You know, because maybe a recession without job loss. That would be that would be unprecedented. But, you know, perhaps that could happen. You know, perhaps the National, the Business Circle Day and the Committee of the National Bureau of Economic Research could decide it's a recession,

even if you don't have a lot of job loss. I'm not sure. Like a modest job loss. What if we lose two or 300,000 jobs? Yeah. Would you consider that a recession? Normally, but if everything else is falling apart. Because you could have a month down on 300K and it's just a statistical fluke, right?

I mean, you know? Yeah, so that's the question. Is that a recession? Recession to me is broad-based, persistent decline. It's got to have job loss, you would think. But I don't know. maybe there'll be a different perspective on that in this current environment. So I still owe you that path for the Fed Fundrate.

You want me to do based on four and a half to four and three quarters being the peak? Yeah. Oh, yeah. Yeah. All right. I'll send it to you over the weekend. That's what markets are expecting right now. Certainly as of today, right?

Yeah. Yeah. Yes. I think it's the most likely baseline. Okay. Oh, boy. Go for your run. I know.

I'm bummed. You guys are bumming me out. All right. Okay. Well, can I ask one more question? And then I will end. When you look at all the different projections being done out there, roughly speaking, consensus is the, now what's the consensus? Well, do you think it's substantially, people think we're going into recession or not? Or is it 50-50? Curious what people are saying. I don't have a scientific survey here, but certainly if we look at just anecdotally,

some of the Wall Street firms, other firms does look increasingly, if not a recession, certainly a significant slowing. Oh, yeah. Yeah. Yeah. So the consensus for, go ahead, Chris, I'm sorry. I was going to say, but I do think that the majority now is pointing to a recession, but what do you see, Ryan?

So the consensus for GDP growth in 2023 is 0.7%. Oh, that's our forecast. It's exactly our forecast. And there's eyeballing it, maybe 15 to 20 that have individual forecasters that have a decline in GDP out of 75. Okay. Okay. Okay. All right.

So it feels like we're in the middle of the consensus. That's what it feels like. Correct. Yeah. Okay. meaning me, not you guys. You never. It feels so lonely.

Jeez. This is killing me. All right. Well, I think we're at the moment of truth, though. The next few months, we're going to figure out which way this thing goes. Okay. With that, we're going to call it a podcast and talk to you next week. Take care now, everyone.