Moody's Talks - Inside Economics - No Con Job Friday

Episode Date: December 5, 2025

The Inside Economics team laments the lack of a November jobs report but dives into the wealth of data released this week about the labor market, income, and consumer spending. The discussion then turns to affordability and whether it’s a con job or whether households are feeling a real financial pinch. A listener question turns the conversation toward Federal Reserve independence and whether Jerome Powell’s successor is likely to have outsize influence on interest rate decisions.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' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Marks, Andy, the chief economist of Moody's Analytics, and I'm joined by a few of my colleagues, my two co-host, Chris DeReedies and Mercedee Natali. Hi, guys. Hi, Mark. How's everything? Everything's good. Did you guys have fun last night?

Is that why we're recording this later in the day because you partied too hard into the early hours of the morning? Well, talk about partying. Let's bring in Dante, Dante D'Antio. So he did the party. Talk about a party animal. Oh my God.

Yeah, really. You know, that one drink at a half the hour. Really got me. Mercer, let me just say, he was out of control. I can imagine. Yeah, it was like, you know, I really had to, you know, say, hey, Dante. How embarrassing.

It was a work function. You know, you've got to take it easy, right? No, no, no. I just, Dante is very well-behaved, you know, very urban. In fact, I was the troublemaker. I was a troublemaker. Because I was given all kinds of grief about his cruising habits, and then we start talking about TV watching, you know.

What is it that you watch again, Dante? I said I watched Yellowstone and we're watching Landman now. It's a new one. It's pretty good, you know. You're talking about some show that you're watching that's, you know, it's about climate change and all this serious stuff. And I'm like, that's not, I'm not trying to watch that. Oh, no, no. Mine wasn't really that serious.

It was, but, but, you know, yeah, I did say the stuff he watches is very broadcast TV, you know. No, you would agree. Marissa? Marissa, what do you watch? I mean, it's a very popular show. People like the show. You know, here. You like Yellowstone, but I didn't like Landman.

Yeah, I couldn't get, you know, I watched like one of those lands. Yeah, I watched a couple of them, and then I was out. Yeah. So you learn a lot about people when you learn about what they're watching on TV, if they're watching. Now, I'll ask Chris, and he'll say, I don't watch TV. That's exactly what he's going to say. I think I said that to you last night. I was like, President Avenue to him. Yeah.

I only read Hamlet, you know. In the wine cellar. I don't know about that. Okay. What is it to Reed's House will actually do, you know? you know at night what is it that you guys do yeah like go to bed early first of all okay well that makes sense yeah that makes sense you know i got an eight nine year old so i'm actually reading the wizard dante that doesn't stop him from burning the midnight oil i mean fair enough

yeah all right what are you watching mark what's this climate change oh actually i'm you know right now i'm i watch if i can if i'm not traveling one hour every night with my wife we sit down and we watch an hour. So we, you know, I'm looking for a lot of content. That's why I ask, you know, what are you watching? And right now I'm watching the House of Guinness, which is, that was good. Yeah, I like period. Me too. Because, you know, it's interesting. It's a different time. You know, and in late 1800s, I have no knowledge of. So I just also watched the, the one on Garfield, President Garfield. I think it was struck by lightning. Yes, that was good. Yeah. But that was pretty interesting. I watch everything. Oh, you watch everything.

I'm at the end of streaming. They can't make enough content to keep up with my viewing habits. Really, that's interesting. Yeah. Then I should get to know you more because I really need some help with the content. Can you give me your number one suggestion?

Like, not of all time, because I can't. No, like right now. On that's right now. Yeah. Claribus is really good on Apple Plus. Have you started that? I have. Yeah.

Yeah, I like that. You like that? Uh-huh. What else? What else am I watching? I'm watching, it's called Welcome to Dairy. It's like the origin story of it on HBO. Yeah, I've heard about that.

Yeah. That's okay. I'm watching it, but it's not. Yeah. And actually, what I really, what I just finished was the American Revolution, the Ken Burns documentary. Last night I finished it. Oh.

Oh, that's interesting. It's excellent. It's excellent. Okay. That'll watch. Good. Yeah. Yeah.

Well. That meets Chris's entertainment threshold. hold. My son's also a big history buff. Yeah, I mean, each, each episode is two hours long. You're nine-year-old with a history buff. Absolutely. That's awesome. That's why we don't watch any of these series or anything. That's all I likes. We watch black and white movies, Charlie Chaplin. My gosh. What does he like better? Bitcoin or Ethereum? That's what I really want to know. He's in the hard currency man. He's a currency man. Okay. He's collecting. He's going to go a A million dollars from 1957.

Boy. I guess we've got to get down to business here, guys. So let's talk about the data, a plethora of data, cornucopia of data, they've come out in recent days. This is Friday, December 5th, so we've got some more data today. The government statistical agencies seem to be catching up. So we're going to talk about the labor market data that's come out, and Dante will do that. But before we do that, today I think we got personal consultants. consumption, PCE deflator, consumer expenditure deflator, saving rates, consumption, all that kind of good stuff. And I think, Marissa, you're going to lead the way on that, right? So would you? Yeah. Yeah. So we got personal income, a point four percent over the month, which is what it was a year ago. It was mainly led by wages and salary increases. The PCE deflator was up point three. So on an inflation adjusted basis, income was up point one. So real.

income was up 0.1 month over month. On a year ago basis, it's up 5.2%. That's, you know, of course, nominally, right? And income is. Income is. That's right. Yep. And that's what it was a month ago. So we're talking, actually, we're talking about the month of September, because as you mentioned, is the bagwog. So we're actually talking about three months ago. We don't have anything recent. So these are all the September figures. Disposable income, nominally, up 4.8%. on a real basis. It was up 1.9% year over year. It's been in that roughly 2% range for the past, well, from July through September. It was roughly in that range. The savings rate held at 4.7%. So that's down quite a bit, you know, from where we were earlier in the year when it was a little bit above 5%. So, yeah. That might be the wealth effect, right? I mean, high income household, high net worth saving less because they feel in our wealthier.

Yeah, okay. And could also be lower income households having to draw down any savings that they may have as well. So I mentioned the PCE deflator was up 0.3% over the year. And again, that was the same as it was in August. Again, we're talking about September here. The year-over-year rate on the PCE deflator is 2.8%. And that's up a tad from where it was in the previous month. Grocery prices.

Is that right? I thought it was on a year-over-year basis, it actually ticked down a little bit. Am I wrong? It definitely could be because I'm traveling. No, it went up. It went from 27 in August to 28 or September. And that's the overall PCE deflator.

Okay. That's right. that's the overall PCE deflator core ticked down. Maybe that's what you're thinking of. So core went from 29 to 28 on a year-over-year basis. Grocery prices, food prices kind of led the way on this inflation that we're seeing in the PCE in September. So service price inflation actually cooled a little bit from 0.3% month over month to 0.2. but goods inflation went from 0.1 over the month in August to 0.5 over the month in September.

And a lot of, much of that was led by, that was all in non-durables. So it was groceries and clothing and, yeah, that kind of thing. You describe that to the tariffs in part, Marissa? Do you think it's passed through? Certainly the food. I think components of, there may be other, there may be seasonal, you know, we always have issues with the food supply being affected by weather or things like that. But yeah, I mean, it does, it does seem like a lot of it is imported food. We've talked in the past about certain fruits like

bananas, coffee, chocolate, things like that. So, yeah, I do think a lot of it is tariffs. I mentioned that I did mention the savings rate. Let's see. What else? Consumer spending? What about consumer spending? Yes, right, consumer spending. So, spending held steady. So no change in spending between August and September. Good spending fell and most of that was in durable goods and there was a big decline in spending on vehicles, vehicle consumption. And kind of all over the place too, like furniture spending fell, recreational goods fell. So just kind of durables across the spectrum were very weak. Non-durable goods fell. So again, like, spending on food and beverages, clothing, all had very big declines. Service spending was up but weak, 0.2% on a month-over-month basis. Spending on recreation services fell, and that was the first decline in several months. And we've seen, you know, we've seen sort of that leisure hospitality recreation category

being fueled by the upper end of the income spectrum. There was some weakening in this in September. So on a total, I'm sorry, this is, when I say that it was unchanged, that's on a real basis. So that zero is on a real basis, right. Nominal spending was up point three, but I said the PCE was also up point three. So that gives us a zero on real spending. So kind of weak, I think, overall here for all these things. Real consumer spending? Do you know what it was year over year through September? It's real after

inflation. It was zero month to month. Yeah, if you give me a, I'll find it. Yeah, I'll find it. But your general assessment here is that it's kind of on the soft, showing things are on the soft side. It does look soft to me, yeah. And you're most focused on the consumer spending? The spending is soft. And I'll say, I think, spending is up only one percent through the year, right? Like since the beginning of the year, total spending is only up one percent. Real consumer spending. Yeah. Since the start of the year through September is up one percent, not annualized, but that's right, right. Just like from, you know, January through September, spending's up one percent. Okay. Yeah. So that's, that's weak, right? Like,

that's weak compared to, I don't remember what it was in 2024. It's somewhere between one and a half and two percent is what you're saying. So you're saying so far this year, in calendar year 2025, real consumer spending is up. Feels like if you analyze that number, it would be close to one and a half percent. Yeah, yeah. And that's on the soft side because it's been closer to two to two and a half, you know, up till this year. This year.

That's right. Got it. Yep. Yep. Okay. Okay. Good. What about anything else on that or any other, anything else you want to say about the non-labor market related data? Everything's labor market related, but directly labor market related data? I mean, we did get, we got the Michigan survey, Michigan consumer sentiment, ticked up a bit over the month. It was a little better, but components of it weren't great. Inflation expectations in that survey actually fell. to their lowest point since January, which was interesting.

But they're still high, right? Consumers are still expecting over 4% inflation for the year ahead, which is double what the Fed wants to see, right? And higher than where we are right now on inflation. But it was a little bit better over the month on the total Michigan sentiment survey. Okay. Still very depressed, though, very, very low. You're just saying it's extremely low.

Yeah. Yeah. Okay. All right. What about the labor market data? Is it also on the soft side, Dante? Definitely soft, yes. Over the last couple days, we got the two main sources of private sector data on the labor market from ADP and Revelliol Labs. Obviously, today was supposed to be Jobs Friday for the November report, which we don't have yet. But we have those private sources for November. They were both negative on a top line in November. So Revello had overall total non-farm payrolls. down by 9,000 in the month of November. And ADP had total private payrolls down by 32,000 in November. If you look across the last two months, because we don't have October or November data from BLS yet, Revelyo was actually down in both months. So combined October, November, they have about 25,000 job loss across those two months.

ADP combined is actually a little positive. They had a stronger October number, so they're combined is up about 15. thousand over those two months. So we've been looking at the average between the two as a pretty good way to track sort of what BLS is likely to show. And if you look at the average of those two over the last two months, you're basically at zero. So I think we should be expecting job growth that comes in pretty close to zero for both October and November. From the BLS. From the BLS when we get it in a week and a half or so. Couldn't it even be weaker because of the government layoffs that we know are coming related to the Doge cuts earlier in the year? It could be. And that's part of the

reason why there's a gap between the ADP and Revello data for October, right, because Revelyo does capture, at least in theory captures public sector payroll. So, I mean, ADP was up 47,000 for the private sector in October. Revelyo was showing an overall decline of 15,000, including government, right? And I think that had a pretty substantial decline in governments baked into there for October. So, I mean, I think there is certainly a reason to believe that the public sector is going to be pretty strongly negative for the October data and likely pulls the headline down negative if I had to guess. Well, it feels like the numbers are maybe the government you can view as more one-off, right, because it's related to the dose cuts. And this reflects the cuts earlier

in the year. People got on deferred resignation. I think that's the way you describe it. And that gave them severance effectively through October. And then they came off the payrolls and that's now being reflected in the data. And that would be kind of a one-off. I mean, obviously there's been, there's going to be continued, it feels like, continued cutting in government jobs, but this was a big step down in government jobs. And that'll come out in the October data that we're, we're going to get October in November from BLS next week, aren't we? It's the week after on this week after next. Okay. Yeah. Okay. But if you kind of just take a step back and look at the employment data broadly, is it fair to say that the job market, it's like, going sideways here? It feels like at best, it's no job growth. And it feels like we're starting to get some more negative signs than positive signs, you know, month to month. Is that fair? Yeah, I agree. I mean, I think we're starting to see more offsets, right? For a while,

it had been health care was sort of growing strongly enough and maybe leisure and hospitality were growing strongly enough to keep that top line positive. And you had sort of pockets of weakness elsewhere. You're still getting growth, I think, you know, especially in health care. But I think, you know, that growth is probably slowing a little bit. And now you're getting sort of more weakness elsewhere. And I think you're going to see, again, more numbers that are close to zero or even negative because of that offset. Right. And just one thing I want to check with you on is if I, when I look at the data, the payroll employment data, and I kind of extrapolate for October and November based on what we're seeing from ADP and Rivellio. And again, we'll get the

real numbers in a couple weeks. But it looks like since, let's say, May of this year, there's there's essentially no job growth or really on the margin if there's any job growth at all. And that at least correlates with the tariffs. I mean, because we had so-called Liberation Day in April, which those are the reciprocal tariffs that created a lot of concern and drama and affected financial markets. And it feels like since then we've been getting these really weak job numbers. Is that fair? Am I reading too much into the data or do you think that's, I'm connecting the dots appropriately? No, I think that's fair. I mean, I think the other thing we've talked about,

obviously, is that labor force growth has slowed a lot this year too, right? So it's not entirely clear, you know, how much of the slowdown and job growth is, you know, sort of demand side driven that firms just don't want to hire because of uncertainty and tariffs and how much is the pool of available workers is just pretty thin right now because, you know, labor force growth has been, you know, had been almost flat, you know, through the middle of the year now is, It's ticked up a little bit over the last couple months, but it's still very, very weak in terms of growth for the year. So I think those two things combined, certainly account for most of the slowdown in my mind. Yeah, I guess you're right, because, I mean, the crackdown on immigration and the impact on labor force happened about the same time, you know, about the same time during the year.

So it's both those things, and one's labor supply, the other is the immigration is more labor supply, although there's some labor demand effects there as well. but it's mostly supply, and then you've got the demand side effects from the tariffs, you know, kicking in about the same time. So both those things. Okay. Okay. All right. Chris, what do you think? How would you characterize everything based on the data dump we got this week?

Pretty weak, certainly, right? Income spending all those metrics that Marissa mentioned. And the labor market front, well, I think kind of moving. being sideways. I think you make a great point about the demand versus supply, right? Job openings are still relatively firm, right? They're weakening, but that would suggest that perhaps it is more, or the supply certainly is a big part of that story in terms of the job growth. Wouldn't? Wouldn't it? Oh, you're asking me. Sorry. Sorry. Yeah, although I don't put a whole lot of weight on the job opening.

data because there are a mess. I mean, phantom shadow job openings, so forth and so on. Maybe that means less when you look at the change in, but still, I'm not sure how much to read, I'm not sure how much to read into the level of job openings at this point, just given all the measurement issues. But yeah, I think that makes sense. But your general sense is that you said weak, the labor economy is weak. Yeah, it seems that way.

I saw a FISA report on retail sales for the holiday season. So they look at what October through December 1st, I think, was the report. And it shows some growth around Black Friday and Cyber Monday. So it seems like consumers are really bargain hunting. But outside of it, if you look at the total period, it's either flat to down, right? So does suggest that consumers aren't nearly as aggressive as they were last year. and are being a lot much more selective in their shopping. I guess the other piece of information in the ADP data is they broke,

they break the job change down into small versus small, excuse me, small versus large business, you know, company size. And in the data, and this is not just for the month of September, but recently larger companies are adding to payrolls, smaller companies, especially the smallest companies, are reducing payrolls. that's real weakness appears to be. That would be consistent, certainly with tariffs, right? Because the smaller businesses can't pass, and they don't have much of a margin anyway. So they have to make some pretty tough decisions, you know, pretty quickly. I guess it might also reflect supply, though,

maybe because the smaller businesses will more be more reliant on immigrant labor. So again, maybe that doesn't help identify whether it's demand or supply. But that's the, yeah, like if you think about restaurants or small construction businesses, right? Like those things would be very dependent on immigrant labor. Right, right. So that doesn't help in disentangling, whether it's demand or supply. But whatever it is, we're not creating any jobs, you know, at this point. And that's not a very comfortable place to be.

Yeah, but I guess it matters in that if the Fed is looking at the labor market to try to gauge what to do about short-term interest rates, are they concerned that the labor market is weakening too much? Or maybe is the labor market in equilibrium because supply has been drawn down so much? And that may change their calculus. Yeah. The way I would answer that, though, is I'd point to the unemployment rate. It's rising. That it's risen, right. Yeah. So that's saying it's not risen a lot, even though we were going to create job growth. So, therefore, there is a labor supply, you know, impact. But it is rising, definitively rising.

Unfortunately, we're not going to get a data point for October going back to the government shutdown. So, you know, we'll get a number for November, for not for October. But anyway, it is rising. So that does indicate that demand is playing a role, right? I mean, the economy is growing below its potential. And that's, you know, demand, the potential encompasses, the supply side and what's going on in the supply side. So demand is weaker than supply, and therefore, I think that's what's motivating the Fed decisioning around cutting interest rates. They're saying,

yeah, it's supply, but it's also demand. And here we are. We're not creating any jobs on that. So let's err on the side of supporting the labor market as opposed to worrying about something else like inflation. No, makes sense. Chris? Chris looks like he doesn't agree. Yeah, he's fidgeting I'm always ready with the counter-argument. How about, well, it could be, certainly, also could be mismatched, though, right? If the demand is, if the labor demand now is in a different area, then the skills are the labor force that's on offer, right? You could have unemployment rising in that environment.

So still relatively strong, I think to Mercer's point, really matters if it's a demand or a supply issue here in terms of the policy going forward. I guess the other thing in support of the supply argument is we're not seeing layoffs, at least not yet, right? And that was the other job. That would be proof positive of its demand, right, if we're getting layoffs. UI claims. Yeah.

Yeah, but you know, can I ask, I'm just going to throw this out and I, I'm sure there's no way you have an answer, but maybe you can think about it. Is it, maybe I've said this before, but I'm going to say it again. because it's bothering me, could it be that the UI claims aren't reflecting layoffs that are occurring? If we are getting layoffs in parts of the economy that are, let's say the AI layoffs, these are more professional services, these are technology jobs, these are financial services, these are kind of white-collar jobs. People get severance. They tend to get severance. Yeah.

So we could be having layoffs. People are getting severance, and they're not going to be on the UI rolls. They can't go in the UI rolls while they're collecting severance. So it just takes time. And the other thing is those workers, those kind of white collar workers, presumably somewhat more educated, they're going to be less likely to file for UI, right? Or at least it's going to take them a while to file for UI. It's not something they've ever, typically have done and probably will be delayed. Is I, am I off base there? No, I, I, we've talked about this a little did we talk about this? Okay. Yeah. I mean, if you're getting, if you're getting compensation from your employer when you've been laid off, you can't collect unemployment insurance. So you have to wait till that runs out. And if you're still unemployed when it runs out, if you had been making a lot of money, you might have savings. You might have, we've talked about the replacement rate, right? We've talked about the fact that today's UI payments in most states on average are only replacing maybe a third of what someone's wage was in their job. So for some workers, they might say, it's not worth it for me to go

through the paperwork and do these check-ins and file for UI. I've had six months of severance. You know, I'm going to probably find a job pretty soon. So I think there's been a structural decline over the years. You can see it in the number of people. Kind of that replacement rate has come down. The calculus for filing for UI for a lot of workers. just isn't there. Got it. Got it. Anything to add there, Dante, before we move on? Yeah, I mean, the other, so, I mean, duration has also come down to, right, the available duration of benefits, right? It used to be the case that, you know, 26 weeks was pretty

standard across every state where if you filed and you were, you know, sort of approved for benefits, you'd get 26 weeks of benefits. If you needed them now, you know, there was a push probably a decade ago in a bunch of states to reduce that threshold, right, down to as low as 13 weeks in some cases. So, to Mercer's the same point, you know, the actual dollar value of benefits is lower, and the amount of time that you can collect benefits is lower. So, again, if you have savings, if you think you're going to find a job pretty quickly, do you go through the household paperwork? Right, right.

Okay. Is there any way for us to actually test this hypothesis? I can't think of anything, but maybe it gives that some thought, because I think that's an important question. I mean, obviously, it's a very important question because if there's, because if you look at Warren notices, if you look at Challenger, and outlayer. announcements. I mean, I might use my statistic, but there's well over a million layoff announcements by Challenger this year. And you have to go back to 2020 and before that 2009 to find as many layoff announcements. So in Warren notices, obviously, those are companies by law have to report to the Labor Department these announcements in 60 days in advance of the layoff announcements if they're of a certain size and the companies of a certain size. So they're a pretty good. account and they're up. So it does feel like layoffs are kicking in, but we're not seeing it at all in the UI claim. So I think this is really important to kind of dig into. I bet there's research out there. We'll search for some, but we'll do it ourselves if there isn't. But yeah, I bet there is. Because I referred to this before. We did a big study on unemployment insurance, the whole system years and years ago in collaboration with the Urban Institute. And we did all these simulations around various scenarios about UI and recessions. And,

I remember that being a feature of this paper that we wrote, that there was the structural kind of decline in filing for UI for these reasons. And that was, you know, that was a long time ago, 10, 15 years ago that we did that. Okay, let's move on. We are going to play the game, and we are going to take a listener, question, too. But before that, let's talk about something that's come to the top of the kind of general discourse and debate. And this is around affordability. you know, this is the kind of the catalyst, most recent catalyst for this discussion around

affordability were the elections, the special elections that were held a couple, couple three weeks ago now in New Jersey, Virginia, New York City also had a mayoral race. And affordability was kind of front and center in terms of that election. And of course, the Democrats won. And no surprise there. These are states that are more democratic. But the, the kind of kind of the magnitude of the wind was instructive and suggested that there's a lot of concern about affordability. And you can see it in the consumer sentiment surveys. We talked about University of Michigan. You could look at the conference board survey. That also has fallen sharply recently. And it does feel like people are saying as loudly as they can that the cost of living is too high.

It's unaffordable. I can't manage things financially. Therefore, I don't feel good about this economy. thus the sentiment surveys, and I'm going to vote accordingly, thus the election results. The President Trump did comment on this and said that affordability, I think I'm not making anything up here, quote, it's a con job, I believe he said. So he's saying, no, there is no affordability problem. So that is all in a way to frame it. I'm going to go to you first, Chris. is, do we have an affordability problem? And maybe even before you answer that question, how do you define affordability?

How do you think about this affordability question? Yeah, sure. I will say, just keep it complete here. The president also said the week before that he was the affordability president. So messages there are kind of going back and forth. Pick one, you're saying. Yeah.

So in terms of affordability, you asked this question before, we got it on the air, so I was trying to think of a, of a definition. And I think in the minds of the public, affordability is really about, you know, having sufficient income to cover your essential expenses, so housing, food, you know, shelter, healthcare, having a sufficient income to squirrel away some money for financial security. So think about retirement, having sufficient funds to cover some type of emergency expense. So it's more about having a comfortable level of income in relation to potential expenses. I don't think people are thinking of something very

extravagant like, oh, the mansion down the road should be affordable to me. I don't, you know, that's not the, that's not the sense. The public is, I think, is much more geared towards it. Sufficient income for a comfortable lifestyle can provide for my children, save up for my retirement, save for college. So that's how I would think about it. And in terms of whether or not we have an affordability problem. I think it depends on who you're talking to once again, right? We have a really lots of concentration in our economy, folks in the bottom third of the distribution by income.

No, there's really not an affordability problem, right? They're homeowners. They probably lock in it. You said the bottom third, didn't you? I'm sorry. I meant the highest. You meant the top third. Right, right.

Sorry about that. Okay. Oh, yeah. Need some more coffee. Yeah. So that top third, no, not an. affordability problem. They locked in a low interest rate on their mortgages if they have a mortgage, right? Their incomes have been growing. They have stock market portfolios or other financial assets that have been growing. So real estate's

been growing as well. So I don't see that as a real issue. Yeah, they are like everyone dealing with higher levels of inflation. That's not something they enjoy. And it certainly erodes, right? Some of their from some of their income or purchasing power capacity, but not really an issue. It truly is that the bottom third that is really struggling, right, from an affordability perspective, their renters, they spend a lot of their budget on essential goods, right? They're feeling the heat in terms of the increased food prices that Marissa mentioned, right? The potential utility expenses, higher electricity prices, right? Homeownership, certainly, if they're trying to buy a home or even rent a home,

it's a real struggle relative to their incomes, right? price to income ratios, price to rent ratios, all of these measures are way up due to the rising real value values. So there is definitely an affordability problem for that segment. And that segment also tends to have a lot of younger adult right there in that first stage of life. And they're facing these higher costs head on at the same time that they've taken on perhaps student debt or facing other types of costs. So yeah, they're definitely feeling the squeeze. Well, you mentioned the top third to bottom third. What about the middle? Third. So the middle is kind of in the middle, right? It's, uh, I,

but there's, I mean, they feel an affordability squeeze as well. So I, uh, yeah, it's variations, variations, but I think that the middle third is probably okay, right, for the most part in terms of, um, in terms of being able to meet the criteria I mentioned. Many of them are homeowners, even within that group, right? Two thirds of households are homeowners. So again, they have the housing costs under control, perhaps, but that's the, college costs, perhaps, or the elder care costs that are really a challenge for that group. So I would say they're still, you know, sensitive to the affordability challenges. They're so struggling in some ways, but not nearly to the extent as the bottom third.

Yeah, I mean, though, given the overall sentiment surveys and the voting patterns, it feels like this isn't just a problem for the bottom third of the income distribution. Or it's not, it's an issue for a broader segment of the population. feels like the bottom two-thirds of the distribution, you know, I don't want to paint with a broad brush, but there's variability. But generally, it feels like that bottom two-thirds is, yeah, we got an affordability problem. I'm paying more for, you know, everything I'm buying and I'm not as comfortable about the labor market as I was. Therefore, you know, I have an affordability problem, no? Yeah, no, I agree. I'd, so if we're thinking about the politics of this, I think even the

folks in the top third are concerned, not for themselves, but for their children, right? they're looking at the next generation. Maybe they're having their children moving back in, back home because of the affordability challenges there. So yeah, they'll say, no, it's not an affordability problem for me, but it's an affordability problem for my children or my grandchildren. I'm seeing that these costs are there and I don't see a lot of movement there. So that's my sense in terms of how this is playing out with it. I think there's a general understanding that this is harming the economy, whether or not individually households may be feeling the pinch right i think we can debate in terms of where that exact line is but certainly um everyone i think

is acknowledging that this is this is having a real impact uh okay so okay marissa how do you what is is it is uh the affordability issue a con job what is it do you would you would you define things any differently than chris and how do you think about this no i mean i guess i was as chris was speaking, I was thinking, I would think that home ownership makes a big difference in how people feel and think about whether things are affordable. If you own your home, presumably you have a 30-year fixed mortgage, right? You're in the minority if you don't. And not only do you have that housing sort of locked in, but also you've probably accumulated a lot of equity in your home, right? So even if things are more expensive that you're spending on, there's that wealth effect where you think like, well, if I needed the money, if something happened, right, I have, it's not necessarily liquid, but you could take out a home equity line of credit or a loan or something like that. I just think that I would think that people that do not own their own home probably feel a lot more dower about their finances than if you own a home.

regardless of where you are along the income spectrum or where you are in the country. And I think from like the political perspective, you know, New York City is New York City. It's extremely expensive, right? Like everybody points to that election. I mean, that was a almost a referendum on housing affordability in that place. But I mean, in New York City, you have to be like, you make $200,000 a year. You're like poor in New York City at that level of income practice. Right. So that is a, I think, extremely unaffordable place. And you see that reflected in the voting patterns. If you go to places that are more affordable in the middle of the country, maybe people don't feel as dire about affordability, especially if they own a home. I think you make a great point about homeownership. Chris, didn't you pass around a recent paper about homeownership and how people view that as like, if you're not a homeowner, as very significant deleterious.

This doesn't ring a bell. No. No, it doesn't. Oh, okay. All right. I don't know much more than that. I thought you did. But it looked like a really interesting paper.

We'll talk about that next time, though. I'll bring that back up. But I think, Marissa, I think you make a great point. I think homeownership is kind of central. And certainly for many middle income Americans, that's kind of central. So they're thinking about, you know, their standard of living, which goes to affordability. At the end of the day, it's about living standards. And they're saying, if I can't afford a home, if I can't get in a home, you know, I'm not there financially.

And that's the best way for me to generate wealth in the long run. And I'm just being locked out. Yeah, I think it's economic security. You know, you have this this asset, this asset that usually appreciates. And so that gives you this sense of security that I think you would not have if you, did not own a home, especially if you wanted to own a home. Yeah. Renters are also subject to rent increases, right?

Regularly. That's right. Especially New York. I can test to that. So, yeah. So, yeah, that's going to weigh on your site. If you've locked in that payment, right? Yeah.

You know what it is. With a mortgage. I mean, then there's the issue of the non-mortgage expenses of home ownership that have been growing, right? the rising cost of insurance and property taxes. I mean, that's another aspect, and that has been going up even for homeowners. So maybe homeownership is becoming a little less secure, but probably better than renting. Yeah, even if you can afford those increases in your insurance, that certainly could go to the sentiment of things that are moving in the wrong direction now from an affordability perspective.

Hey, Dante, any views on this? A con job? Real or anything to add? Yeah, I mean, I certainly think it's real. I think, you know, Chris alluded to the student loan issue before, and that's something that I've been watching pretty closely. I think it maybe gets at that middle third a little bit more because, you know, distributionally you think about, you know, at the bottom third of the income distribution, you probably don't have quite as much student loan debt there.

At the top third, you probably have student loan debt, but, you know, you're more easily managing it and affording it. And then you've got that middle third who's more likely to have it and also less likely to be able to afford it. You know, we saw delinquency rates skyrocket, you know, coming out of the moratorium that we had on payments during the pandemic, during and after the pandemic. And you're still talking about, I was just looking, you know, double digit delinquency rates, you know, accounts that are 90 days plus delinquent, right? It's up in the double digits and it has been now over the last six months or so. So, I mean, you've got a pretty big chunk of people out there who, you know, they're not choosing not to pay their loans because they just don't feel like it. I presume, right? They're choosing not to pay them because they have to prioritize other things first,

right? Their housing costs, their car, whatever else comes before that. And so I think that just tells you how much stress there is, right? The fact that you've got this huge mass of people out there that are just not able to pay their student loan debt. And maybe there's some of that that's they're hoping it will be forgiven one day. And so it's the thing that I'm going to put to the bottom of the list, but I still imagine that if they could afford to pay it, they'd be paying it in larger numbers than they are. Yeah, I mean, this is no con job. This is this is real. I mean, I think the well over a majority of Americans feel very uncomfortable with the economy. And it's gotten, it's all been exacerbated over this year, this past year, right? Because the policy, the tariffs, the immigration policy,

what do they do? They slow growth, they slow job creation, which makes it more difficult to find a job if you lose a job, hold on to a job, get the pay increase that you're accounting on, and raises inflation, right? So both those policies do both those things. They're stackflation-esque. Stackflation, people hate stackflation, and it's being manifested in the term affordability. The other thing I'd point out is it's just, it's about certain things that are really triggering for people. And I think mercy you nailed it with home ownership. I think that is a, you know, central in people's thinking about their financial well-being and their financial success.

I think hiring is triggering. People cannot get jobs. If you lose your job, go take a look at continuing claims for unemployment insurance. You know, initial claims, that's people going in, but that's been low, but people can't get out. It's like Hotel California. You lose your job. You're stuck.

And you're in the continuing claims. And so I think that hiring, and that goes to young people, young people are the the folks that, you know, are coming into the labor market, they would need to be hired to get into the labor force. They're not. I mean, the unemployment rate for 20, 24-year-olds is over 9 percent, up three percentage points in the last couple of years, and the direction of travel here is pretty disconcerting. The other triggering thing is inflation, but for, I think you said it, Chris, necessities. These are things, you know, the stuff that you need to buy, food, electricity, rent, you know, all those things are up a lot, you know, over the

past several years. And they're, you know, some of those things are, you know, they've kind of gone flat here like rents and gasoline prices, but other things are taken off and adding to the, to the kind of the ang. So I think it's, it's the kind of certain triggering things that are going on that have made this, you know, much more central in terms of people's thinking about the way things are going. And it's all being manifested and labeled affordability. And I just don't that's going away in the context of the policies that are in place. So a big deal. So in my view, this is not a con job. This is, this is for sure. This is real. And broadly, it goes to the case-shaped economy, the income and wealth distribution, you know, broader general

trends that have been in place for a long time. They're just being supercharged in the current economic environment. Anyone want to push back on anything I just said, Chris? Anything I said that you would push back on? No, you agree. No, I think you're right. It's the direction of travel, the trends that people are seeing that. Now, that's why I think it's an issue now, right? Even more so. It's always in the background, perhaps, but it's kind of accelerated. People don't see a bright future ahead.

And I knew we, I'm always happy when Dante comes on because he says something I didn't think of. The student loan thing, that's also this year, right? You started the year, people didn't need to pay because of the forbearance, they needed to pay, but you weren't reported to the bureaus. starting this year you're if you didn't pay you get reported the bureaus and you get the clock starts ticking on wage garnishment because these are federal loans that's pretty pretty scary spooky and I'm sure that's making a lot of people very upset and nervous okay all right well

let's go to the what's your pleasure should we do the game first and then the question or should we do the question questions before we do the game mercia what do you think let's do the game okay let's do the game the game is the stats game we each put forward to staff The rest of us tries to figure that out with clues, questions, deductive reasoning. 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 I guess if it's apropos to the topic at hand, which is kind of sort of affordability, but it can be broader than that, all the better. And we always begin with Marissa, or I think we've broken that tradition once, but we're not going to break it today. So, Marissa, you're up. What's your stat? My stat is 50.7. ISM survey?

Okay. That was a purchasing manager survey. It blew me off. Michigan? It is from Michigan. Ah. Independence? That's the, because the overall is 55, I think, right?

55.2 or something. That's the index for the University of Michigan, but that's not it. It's not independence. There's some demographic group, though. No. Isn't it 53.3? That was the top line, yeah. Top line?

3.3 was the top line? Okay. Was 50.7, like, future expectations or something? No. No, all right. 50.7%? Marissa? Current conditions.

Yes, there you go. It's the current conditions index. It wasn't the future, maybe. It's not the future. It's today. And I picked it because do you know that this is the lowest it's ever been on record since 1978, since the inception of the survey? January of

1978. More than the great recession. Wow. Think of all the things that have happened since 1978 and

this is the lowest it's ever been and it is rock bottom for both Democrats and independence. It's never been

it's record low for both of those groups. Wow. Yeah. So just so everyone understands this is a

University of Michigan Consumer Sentiment Survey done every month updated every two weeks. they ask a boatload of questions, one of which is around how are you feeling about things right now, kind of present conditions, broadly speaking. And that's what you're referring to. 50.7. That's the lowest in history for the survey and for Democrats and independents. Not for Republicans. They're feeling great, but they're not feeling like that bad. Right. That's right. Wow. What is fascinating. I know. And the other thing I noted is that because the future conditions index, so they ask you like, how are you feeling about the next six months? that actually rose. And the gap between the future and the present is one of the highest it's ever been. So like people feel people's expectations about the next six months are way better than they feel right now. And the only time it was, no, they're not good. But this gap is really big. And the only, and it was bigger in the middle of last year. But if you look at,

at it historically back to the, you know, the late 70s. It's near an all time high. So people keep, people have hope. Right. But they feel really crappy right now. Interesting. Interesting. Well, that fits with the affordability. That that is not a con job that people are, you know, pretty upset. Okay. I think it also is worrying for the Republicans, right? If independence are feeling the worst they've ever felt. Right. That's not good. and that is reflective of these latest election results, but it should also worry them for the midterms, I think, and I think they are worried. Yeah, yeah. Dante, what's your stat? Let's go with 120,000. Is that an employment statistic?

It is an employment statistic. An ADP? It is ADP? Yes. It is an ADP. It's a particular industry? It's not a particular industry now. Is it company size?

It has something to do with company size. You almost gave it away earlier. Is it companies that have more than 50 employees? What's that? Companies that employ over 50 employees. That's the job growth that companies that employ more, that have more than 50 employees or 100 employees or 200. I might have left a negative sign off of this, so down $120,000.

Oh, oh, you did? Really? This brings back Boone. This is a hundred and twenty thousand. You can ask me for a direction. I just gave you a magnitude. So,

yeah, it's negative 120. What the heck? How can be you? Yeah. It sounds familiar, doesn't Marissa? I don't ever want to hear it ever again.

We got to we got to find out what podcast that was. That was podcast. Do you know I was actually looking at all the old podcast because I was trying to figure out what my first hosting podcast was, and it was like October of 2022. And the very first time I was on the podcast was maybe like a year before that, and that's when I did what Dante just did and gave you a magnitude without a sign

and was roasted for it for the following three years. Let's put a pin in this one. Let's put a pin in this one. Dante generally doesn't make those kinds of errors. See, I disagree that it's an error. I did the same thing. It was 100% on purpose. Oh, that's so funny.

Yeah, good. You got to go to you. Small businesses, not large. Yes. They have lost 120,000 jobs just in November, right? So just in November, ADP reported that businesses between 1 and 50 employees, 1 and 49 employees lost 120,000 jobs. It's a pretty big number in a single month. That is a pretty big number.

Yeah. Interesting. All right, Chris, you're up. $5.40. $5.45. $5.45. The price for something. A real time price, apparently, too. The price as of right now. As of right now. It's not gas. It's not gas in California. It's not copper, is it? What kind of gas? Oh, it is gas. Kind of gas. Oh, diesel? No, no. No. Kind of gas. It's some kind of, we should know this.

Natural gas? Yes. No. No. What? Very good for us. Yes. No.

That sounds expensive. Up a 7.7% today. Really? Wow. $5.45. That's why I chose it. It jumped a lot. So 7% up today.

It's 25% up on the month and 77% up on the year. What's going on? Weather? Weather and European imports. European demand. We kind of predicted this. Yes, we did. The, uh,

Additional demand was great for the exporters, but it was going to raise prices and prices are rising. Wow. Yeah, so in terms of the affordability, this is something to watch out for, certainly. If this persists, if, you know, higher gas prices, that's going to make for some higher utility bills this winter. That's also, it's not only direct, but it also affects the cost of electricity, right? Because that's the major, most important feedstock into electricity across the country. Yeah. Yes.

Ooh, boy. That is interesting. Yeah, because I thought it was still around $4 per million BTU, but it's jumped very recently. Yeah. Okay. That's a good one. I gave mine away.

That was the Challenger one. So let's move on to the listener questions. You want to fire up a question or two, Marissa? Love to. Okay. Excellent. And this is now a new feature of the... Inside Economics podcast.

Is it feature the right word? I think that's the right word, right? It is, yeah. Yeah, it's the right word, the new feature. And I guess we don't always do this when we have an external guest on because we don't want to interrupt the flow of the conversation all the time, but we'll do it when it's just us. And of course, this means, please feel free to fire away, you know, send questions our way.

Are we going to do more than one, do you think? We can do more than one. We can do a couple. Okay. All right. This one is very relevant, and I think we just actually came in yesterday. So the recent ADP data seem at odds with the record low initial UI claims. Given that small businesses have been put through the ringer due to tariffs, is it possible that the jobless are not being reflected in UI claims due to the fact that many small business owners are self-employed and therefore likely ineligible for unemployment insurance? Well, that's interesting. That's another explanation for those low U. I claim. What do you think, Dante? Yeah, I think it's reasonable to assume that that's part of what's going on.

I still think what we talked about earlier, just the sort of unwillingness to file, you know, the sort of reduction in benefits probably plays a bigger role. But I think, you know, I think that makes sense to explain some of it as well. Yeah. What do you think, so I'm trying to remember how this works with unemployment insurance. I mean, if you have, even if you're a small, business. If you're paying, if you have employees, right, any employees, you're paying into the U.I tax system. So, correct me if I'm wrong here, Dante. Like, yeah, it shouldn't matter if you're a small business, if you're paying unemployment insurance taxes. But I guess, yeah,

if you're a sole proprietor, then that's different, I think. Yeah, I think that's right, right? If you're a business owner yourself and your business goes under. You don't have employees. Right. You're not filing for UI because you were never paying into the system, I'm sure. Okay. So you think probably this isn't a factor. The smaller companies are the ones that are getting nailed and that they're not participating in the UI program, but they have to, right, by law. Yeah. I mean, even if you're, if you have employees, you've got to file. I'm going to check on this, but. Yeah. But, yeah, I mean, if you have employees, you have to pay unemployment insurance taxes, which means those employees can file unemployment insurance claims. I mean, I guess it's more likely that they have to, but they don't. That's possible, I guess. Right. I mean. Yes. Right. There's that. There's paying people under the table, right? There's some businesses that just pay people cash. Yeah. Yeah, but it feels like that's more in the margin. But let's. I think so. Let's just check it. Let's just check it. Definitely check it. So there is a Fed meeting next week, and we haven't really talked about that. So we have some questions about the Fed. Actually got one today. And how much influence does the chair of the Fed have over interest rate decisions? And this is obviously in the context that Chair Powell's term will be up in the middle of

next year. There'll be a new Fed chair coming in. It looks like it's going to be Kevin Hassett, probably. It's going to be somebody who's much more likely to lower interest rates. But this is one person, right, on a board of, what, 12 people? So does the chair have any outside influence, outsized influence on that decision, do you think? Yeah, good question. What you think, Chris? I think so, at least traditionally. That's been the case. But is it not by legal. But not officially. Not officially, but they have more sway, perhaps, than another board member. Yeah, I mean, I think there is no structural reason why the Fed chair would have more say.

I don't think they get one vote like everybody else on the FOMC. But they do lead the way in terms of communicating to the marketplace, right, to everyone. They're the ones that have the press conference after the FMC releases their decision. They put out the press release, and then there's a press conference. In recent history, that's been the case. And so they can kind of shape the messaging and how they communicate. And that obviously is very, very important. So I think they have some more influence and gravitized.

because of that. But yeah, I don't think there's, you know, any more, they have any more weight than anybody else because they have one vote. In fact, it's interesting. I think a really good tell, you know, there's a lot of concern about Fed independence, obviously. I mean, the president has said openly that he wants to have some influence or the setting of interest rates, monetary policy. And that's, that by definition, is impairing Fed independence. So there's concern about that. that. And, you know, the president is going to nominate someone soon to replace J. Pal who's rolling off his chair in May of 2026. So that'll be a really important tell around how the president's thinking about and to what degree the Fed's independence will be impaired. But the other tell might be

what Jay Powell actually does because, you know, if he he will roll off his Fed chair, but he will still have a spot on the Fed. because his term doesn't end. I don't know when it ends, 2027, 2028, I'm not sure. Historically, when the Fed chair rolls off, they leave the Fed completely because they want the next Fed chair to have independence.

But in this case, Fed Chair Powell may decide, I'm concerned about independence. I'm going to hang on here because, you know, I think I will have an independent voice vote and I want to maintain, you know, that position,

that independence of the Fed, and I'm going to help do that. So, you know, I don't, that's not certainly the most likely scenario, but if it happened, that would be a real signal that we should be very nervous about Fed independence, right? Because why else would he do it except for that? And he's, if he's saying I'm concerned about it, I think we should all be concerned about it. So, you know, another tell. But, but going back to the question, I don't, there's nothing, you know, structurally about being Fed chair. It's more about, you know, the gravitas. And also, you're trying to generate consensus and coming to a decision. And so you're talking to all of the parties, you know, probably more than anybody else on the committee. So you have influence that way. But at the end of

the day, you have one vote. Right. Okay. Yeah, I was going to point to the fact that historically there have been very few dissents, right? So they are generating consensus or trying to get consensus for to a larger degree, right? Right, right. Okay, well, I think we're going to call this a podcast because it's a Friday and I'm on the road and got to get going here. But good conversation. Anything else? Any last parting words before we call it a podcast?

And just to reiterate, we want your questions because we're going to take them, you know, when we don't have a guest, we're definitely going to take them. So please fire away lots of different ways of getting to us, LinkedIn. We've got what does it help? Economy at Moody's dot com. That's the first time I ever got that right. And also Inside Economics at Moody's dot com. Right. And also rate and review the podcast, especially if you want to give us a good rating.

Yeah. That sounds like a good plug there. You see how that three years later, she's gotten to be really good at advertising this podcast. Yeah. You sound like a person who took three years. Here's an evaluation only if you're going to give a good one, right? Yeah, it seems fair to me. There's podcasts I listen to where they say, like, if you give us a five-star rating, we'll give you something back.

But if you don't give us a five-star rating, like, we won't read your question on air. Yeah, we're not going to do that. No, not at all. Yeah, not doing that. But anyway. Other people do that, though. Other people. Well, did it be on when the job numbers do come out?

Yeah. Aren't you coming on? Yeah, we're doing a jobs Tuesday, a podcast, I believe. A week and a half or so. Okay. I won't be here. So Dante will be flying solo. No.

Okay. I'll miss you. We'll have to run the show. We'll miss you. Hey, but you got to make sure that Dante has the questions so that you can ask the questions. Yeah. Okay. Yep.

Okay. All right. Good. All right. Well, we're going to, this is now we're getting into the nitty gritty, the sausage making hair on how we make the podcast, which let me tell you, there's not a lot of sausage making being done. What you hear is what we've done.

So it just, just, we riff. We write guys, we riff. It's very much ad-libbed. Very much ad-lip. Well, I hope you found it informative, dear listener, and we will talk to you next week. Take care now. Bye-bye. Thank you.