Moody's Talks - Inside Economics - Resilient Jobs, Risky Times

Episode Date: May 5, 2023

Another jobs Friday, another strong jobs report. Dante DeAntonio joins the crew to break down the employment numbers and what they mean for the near-term outlook. The team also discusses the recent banking crisis, the looming debt limit x-date, and the most likely outcomes for both. And is someone using ChatGPT to cheat at the statistics game?For the full transcript, click hereFollow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn 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 Zandi, the chief economist of Moody's Analytics, and it's Jobs Friday. Here we are, Friday, May the 5th, and we got numbers for April, and we've got the regular group here to talk about that. We've got Chris, Chris Deeridis. Hi, Chris. Hey, Mark. Good to see you. Ms. Deinatally. Good to see you. Hello, Mr. Zanti. Yeah. Thank you. Doctor. Yeah, I'm sorry. Oh, God. Yeah, we should edit that out. No, no, no. Fair enough.

Yeah. And Dr. De Antonio, too, right? Dr. De Antonio. Yeah. We got a lot of doctors here. Well, it's good to have you all. I did testify in the Senate Budget Committee this week on the debt limit. How'd that go?

How'd that go? I'd say this might be the glass half full in me. Less partisan than I expected. Pretty partisan. You know, a few folks, a few senators really kind of threw a few bricks. But generally, I thought it was less partisan. You know, the thing that really I find interesting is just how frustrated they are with the budget process. They hate this.

They really hate this. Well, it's stupid. Yeah. That's bipartisan. Everyone hates. You know, and there were some, Senator Merkley from Oregon spent his time talking about kind of the history of the budget process. And they all kind of reminisced about how things used to be. You know, how they could get things done.

PAYGO, remember PAYGO, just really bemoaning the current situation with the debt limit. So I found that particularly interesting. So you think they'll get it together? I think so, right? You left hopeful? Did you leave more hopeful? I think I was a bit more hopeful, yeah. That's good.

I think a bit more hopeful. But we're still going down to the wire, right? Just now. Yeah, and I think it's going to take a fair amount of turmoil in financial markets to get there, right? I mean, I think we're going to have some pretty ugly days in the stock market here. You know, we already had the banking crisis situation, which we probably should come back and talk about. But, you know, this, I just don't see them signing on the dotted line to increase the debt limit unless they're under some pretty significant pressure for markets. So I think we're in store for some pretty dark days here.

or before that happened. Hopefully it doesn't do too much economic damage before they actually figure it out. But we'll come back to that. We should talk about that because that's probably we've got two real threats now to the economy. One is the unfolding banking crisis, which we have been talking about, and now the debt limit is front and center, and we should talk about that as well. So we'll do that. But before we do, let's talk about the job numbers for the month of April.

So Dante, do you want to give us the rundown? Sure, I can do that. I think more than anything else of you, if you just looked at the top line number in April, you get a little bit of what's going on in the labor market, added 253,000 jobs, and the unemployment rate ticked lower to 3.4%. But I think in both of those cases,

there's some sort of obvious signs of softening underneath the data that's there at the top line. In the case of payroll employments, there were big downward revisions to the prior two months of data, totaling almost 150K. That's pretty big, right? Those are pretty significant downward revisions. Biggest revision, if you combine both months since December of 2020, and that was kind of a lot of where employment declined. So certainly among the largest downward revision since the pandemic started, the three month average is at 222,000. Now, it was $345,000 just last month prior to revision, a huge swing in terms of what we think trend job growth looks like.

In terms of industry detail, there wasn't a whole lot that was noteworthy. I think construction and manufacturing both turned back positive in April after declining in March. That's probably a positive sign there that things aren't completely falling off in goods producing industries. Tem help is another one where weakness continues and goes like. a sign that certainly softening is likely to keep moving as we go throughout the year. Temp help is down something like 50,000 jobs now in the last three months. And typically a bellwether of the broader weakness in the labor market to come. And I said quickly on that one.

Is that demand or supply? Is it that they can't temp companies can't find people to place? Or is it because there's just less demand for temp help? I think it's a fair question. And I think up until this month, I would have said it was likely demand because we were, you know, adding lots of folks to the labor force every month in supply didn't seem to be as big of an issue. Obviously this month, that pattern changed a little bit. So I guess it's probably a mix of both. Okay. Sorry, it didn't mean to interrupt. No, that's okay. On the wage growth front, things were a little bit less optimistic if you're, you know, sitting at the Federal Reserve. You know, wage growth had been trending more favorably in recent months. And then we got a, you know, a point. 5% gain in April, year-over-year wage growth, according to average hourly earnings, is now 4.4%. We got to read from the employment cost index last week that also was not overly

optimistic, you know, still has wage growth around 5% year-over-year. So certainly, I think, a little bit more negative news on the wage growth front than we were expecting. Negative in a weird way. Negative in a weird way, yeah, negative for, not necessarily negative for consumers, I suppose. Right, strong for consumers, but if it's too strong, that means hard to get inflation back down to target and therefore higher rates. Got it. Yeah. I was wondering, do you describe any mix issues to the strong growth there?

Yeah, there wasn't, I mean, we had strong growth. Can you explain that? I mean, what's motivating that? So this is average hourly earnings in the employment report, and it can be influenced. by the mix of jobs that are being creative. There are a lot of low-paying jobs that'll bias the, all else being equal, the wage growth down. And if you get a lot of high-paying jobs,

the Congress. And this month, you've got a lot less leisure and hospitality jobs, which are low-wage. So maybe, I think that's your motivation, right? Yeah, exactly. Yeah, and certainly the biggest games were in healthcare

and in professional services where, you know, wages tend to be higher. You got fewer jobs added in leisure and hospitality. So, you know, I think it certainly could be a little bit of mix there, but after we got, you know, sort of 0.3% the last few months, seeing that half a percent increases is not ideal, even if there was a little bit of mix involved in that.

On the household survey side, obviously the unemployment rate ticked down, but for the wrong reasons, right? We had seen strong labor force growth over the last several months, and now the labor force actually pulled back just slightly in April. You know, average labor force growth is still quite strong. I'm not sure that it's anything to really sort of read into. in terms of a change in trend about labor supply. But employment measured in the household survey was pretty weak this month as well.

It was only about 140,000 jobs added, according to the household survey. I would say there just wasn't a whole lot noteworthy on a household survey side. Things, you know, sort of improved the employment rates falling, but it was mostly for, you know, the wrong reason in the sense that the labor force was a bit weak. Do you, this is, I know this is unfair, but I will be highly impressed if you look at the, unemployment rate to the second significant digit. Do you do that? I do sometimes. I did not look today yet to see what it was. Oh, I'm so curious whether it was 3.44 or 3.45, you know, it wasn't 3.45, I guess. Then it would have been revised up. I mean, it would have been rounded up to 3.35, but, or was it, you know, 3.3.38. Does anyone know? Do that calculation here while we're, well, we're talking.

Okay, while we're chatting. It was 339. 339. 3.9. So, yeah. Oh, okay. Okay. So, wasn't okay. Did you just do that right now or did you chat GPT? You because as you're all right time, sure you're doing. Did you chat GPT? Hey, chat GPT. Take,

I wonder if you can do that. I'm not chat GPT in over here. No. You're not chat GPT? No. So you just calculated that fast? That was by itself was pretty impressive. Thank you.

Well, that's lowest since summer of 69. Is that the... Isn't there like a song, Summer 69? That was the reference. Yeah, you got it. Oh, I did. Who sang that song? Brian Adams.

Oh, Brian Adams. Yeah, Brian Adams. Yeah, for sure. You have to add that to your... Yeah, yeah, yeah, yeah. Playlist. I'm definitely going to listen to that this afternoon. That's a great song.

Yeah. And I think about the unemployment rate. And think about the unemployment rate. I think it was 69. It was right around the 3.4. Yeah. Right, right. Okay.

Dante, anything else you want to call out? I notice average weekly hours are stable. No change there, nothing to write home about. Any other, I don't want to take anybody's statistic for the game, which we will definitely play. And I'm sure some of these data in the Inpoint Report will be part of the game. But anything else you want to call out? Yeah, the only thing I would say, and I don't think I'm stealing anyone's stat here, the diffusion index, which I think I had called out a month ago, it's still weak.

And actually, it looked like it had rebounded last month and now with revisions. It's been under 60 now for three months in a row, which is the first time that's happened since the pandemic. Can you explain that for the listener? Yeah, sure. The diffusion index measures the essentially the breadth of job creation. So it looks at the share of industries that are adding jobs versus the share of industries that are losing jobs. So a diffusion index of 57 means that's, you know, essentially 57% of industries at the detailed level are adding to jobs. 43% are losing jobs.

It's not quite that simple because there's industries that aren't changing, obviously, that gets split in there too. Typically, a diffusion index, once it gets south of 60 and starts heading towards 50, that is usually consistent with job losses as opposed to job gain. So we had been well above 60 historically high, you know, in 2022, and it's come down quite a bit over the last year. And certainly you can have a diffusion index between 55 and 60 and still have, you know, sort of steady job gains. And that's sort of where we are right now. But I think it's something to

keep an eye on. If we see that continue to creep lower, that would be a single bill that job losses could be on the horizon. Yeah, on the breadth, I was actually impressed that some sectors, like how, like a construction added jobs, manufacturing added jobs, financial services added jobs. Now, now banking lost jobs, but insurance increased. So it kind of at a higher so-called Nakes level, a higher industry level. It was actually impressive, you know, all the positive signs that I saw. Yeah. Agreed.

Almost perplexing. I'm almost thinking, well, we're going to get more revisions when this is all sudden done. So it's that, you know, that 253,000 probably isn't 253,000 when it's all sudden done. Be my guess. Could be close. Would that be your intuition? Yeah, I mean, based on what we saw, not in terms of revisions, I wouldn't be surprised.

It wouldn't be surprised. Yeah. Yeah, okay. Okay. Marissa, let me turn to you next. So you heard the rundown. Anything, any color you want to add to any of that? You know, generally speaking, how do you view the employment report in the context of, you know, an economy avoiding recession, but also in the context of inflation and what the Fed might do next?

I agree with Dante's take. The headline looks stronger than I think some of them. underlying detail is the household survey is certainly not as strong as the payroll survey. The labor force declined. The participation rate didn't move. The employment gain on the household side was much smaller. And those big revisions in the past two months have me wondering, you know, if we're going to see more of these big downward revisions and perhaps this is overstated. Kind of what we've been expecting to see. Just keep expecting sort of the bottom to start falling out month after month and it just doesn't really happen. So it's still certainly a tight labor market,

but take that in account with the Joltz data that we got this week with some of the other data we have on layoffs. And it's very clear that the job market's cooling. Joltz being job opening labor turnover survey. Right, right. So we saw a big decline in the number of job openings. We saw a decline in hires. So it's consistent with the cooling job market, but nothing catastrophic. So it's good that its cooling seems to be doing so slowly. The wage growth numbers from the payroll survey, I was just taking a look by industry. And I do think it is more of an industry mix, that half a percentage point increase that looks very strong over the month. If you look at some of the industries, like leisure hospitality and retail, where wage growth has been very, very strong over the past

couple of years, it was pretty weak. So I think it is more of a mix of the kinds of jobs that were added over the month. Okay. So generally speaking, job growth is still solid, strong, but slowing and probably slowing a bit more than the headline number here. Yes, I think so. I think so. Yeah. Chris, do you agree with that characterization? I do. I do the revisions. I certainly agree with Mercia Dante, that the revisions give me pause, right? When looking at that top line, 253,000, sounds great, but good chance that it comes down. Right. Anything else in the report you think is important to call out? we see good

good results across the demographics assuming those hold as well so it's again that's that's favorable it's indicating it's not just in a few key sectors where you're seeing some of this growth so that certainly would be a positive yeah it looks like the markets

I mean the stock market and the bond market or viewing it relatively positively there's a lot other things going on obviously you like regional bank stocks and that's bouncing up and down and all around. But it feels like market didn't, had no problem with the report. Is it, is it, so what do you think, I mean, do you think, what does this mean for monetary policy? Do you think, I think markets are anticipating that the Fed rate hikes are over, that if you look at the futures market for Fed funds, the rate the Fed controls, the, the increase the Fed put in place.

on Wednesday, the quarter point, putting the funds rate over 5%. That's the end of the story. That's the so-called terminal rate, the highest rate is going to get in the cycle. And then markets seem to be anticipating, looks like, rate cuts in the second half of the year. They kind of digested today's numbers well. I mean, I've seen nothing but green on the screen up to this point in time. That could change, obviously, but, you know, that's the case. So it feels like markets feel pretty good about this and what it means about it's

consistent with the idea that the Fed's going to end its rate hikes here. Is that a fair interpretation? I would say so. I think market is discounting some of these. Right, if you just took the report on the surface, then you might think, oh, still lots of strength. That point five percent average hour earnings. That would cause an alarm bell.

It would have caused the alarm bell a few months ago. But I think, given all the other issues and the fact that there are these revisions and potential mixed issues. I think markets sussing that out. Yeah. Okay. It just feels like to me the labor market is moderating very gracefully here so far. We're getting, unemployed did notch down 3.4% of the month, but it was 3.4% in January.

It basically has gone nowhere for about a year. It's been hovering around 3.4, 35, 36 for a year. And, you know, we're seeing a kind of a normalization in all the underlying aspects to that, to that. Hiring is normalized. It feels like layoffs are normalizing. They've been incredibly low. And now you saw the unemployment insurance claims their weekly average is, what, 240, 250, something like that, which is pretty consistent with where you would see it in a well-functioning economy. quit, go back a year ago, felt like everyone was quitting their job, quit rates.

There's still, I think, maybe a little bit elevated, but, you know, not that much up more elevated. It just feels like everything is kind of normalizing in a reasonably graceful. Even wage growth. I mean, you know, with that rate of that low unemployment, you might have thought, well, we're beyond full employment, therefore wage growth would accelerate. It wouldn't decelerate. but it's still too high, no doubt about it,

and it may be not coming in as fast as the Fed would like to see it if they could write it on a piece of paper, but it feels like it is coming in reasonably gracefully. Does that, and I think actually Chair Powell, Fed Chair Powell said something to that effect in the press conference after the monetary, the FMC met and they raised interest rates. And he says he doesn't think recession is going to occur.

And one reason for that is, this kind of normalization that seems to be happening in the labor market feels like it's all coming together. Am I being, I know I am, but I'll ask, am I being too sanguine? Or not? I mean, I certainly think the Limerner is rushing too fast. I mean, I think, you know, if anything, there's signs that sort of the slowdown is getting slower. You know, you mentioned claims they rose a lot in February, January, February, but now they've basically sort of stabilized around $240,000. So it certainly doesn't look like, you know, layoffs are accelerating at this point.

Yeah, we've got the downward revisions to job gains, but even if job growth was at 150,000 instead of $225,000, I think we'd still be totally fine with that. So, you know, the fact that job gains are slowing is exactly what we want and expect to happen. So I think, I think there's a lot of room on the downside yet for things to go, you know, further south before it's a big concern. I think the real question is, are things slowing fast enough? And, you know, are they slowing fast enough the Fed won't keep raising rates. And that in my mind is the biggest question a little forward. Yeah, right.

Chris, any pushback there on my saying when picture I just painted for the labor market? No, if this is the optimistic part of the podcast, you know, I'd agree with all. I'll even throw in another factor that gives me some optimism or makes me. Oh, okay. I'm all for that. Go ahead. Far away. Small businesses, small business formation, applications for small businesses.

continues, you know, very, very strong. How timely is that data? I know that's from IRS that's based on the EIN, the employee. It's weekly, right? So it's, I've checked it in a couple weeks now. So maybe I go back. But in my last, my last read, we were still above 2019 levels in terms of weekly application.

So somebody's out there still seeing opportunity. And that's promising just in light of. of tightening credit conditions, right? If people still feel confident enough to go out and try to create a small business, then they must be, presumably many of them are getting credit from somewhere. So that's also a good sign. Yeah, at least so far, I guess that's the risk, right? If the tightening standards is coming, right, and the regional banks, especially the small banks, are primary providers of a lot of that small business credit, right? That could be the But so far, you're saying there's no sign that that's crimping growth in businesses.

People are still entrepreneurs are still out there. They're still sensing opportunity. They're still willing to fill out on an application. Yeah, that makes me. Probably a lot of laid off tech workers. I like this game. Everyone's got to say something nice. Yeah.

This is the thumper principle. Don't say anything if you can't say something nice. or don't say anything at all. What's the Thumper principle? Don't say anything. I don't know. You know what I'm talking about, right? Yeah, from Bambi.

If you can't say something nice, don't say anything. Yeah. Say that. What is it, Marissa? If you can't say anything, if you don't have anything nice to say, don't say anything at all. That's it.

That's it. It's something to live by. Yeah. All right. I got one. I got another one. But that's not why people listen to our podcast. No.

But I think they need some cheering up, maybe. Yeah. The last couple weeks have been kind of brutal. Yeah, that's true. We'll get to the brutal stuff in just a second. But one other positive thing in the employment report for me was you mentioned labor force down in the month, no doubt about it. It fell.

But it's been up strongly in recent months. And year over a year, labor force is up 2.7 something million people. You divide by 12, that's 225, $2,000, $30,000. being added to the labor force, you know, every month in the past year. I keep coming back to this, but that's a lot. That's, you know, consistent with the job growth, which is good, right? The labor market, by that measure, isn't getting any tighter. But how can we be at full employment in labor force grow to that degree, wage growth,

decelerate? It doesn't add up to me, right? I mean, it feels like 3.5% unemployment is pretty close to this. consistent with full employment. And you listen to other economists in the Fed. They say, no, no, no, it's 4%. But how do they, why? Why do you think that?

Dante, do you have any view? How can you, do you agree with me? It feels more like three and a half, doesn't it? I mean, I agree with you. It certainly doesn't feel like we're well beyond full employment, given everything we know about what's happening in the late market. So, yeah, I think it's getting harder to argue that full employment is 4% when we've been at three and a half for a long time now.

It's not like it's been a month or two. It's been most of a year at this point, and wage growth is certainly not accelerating, and we continue to see labor supply picking up. Yeah, I think it's hard to buy the argument that we're well beyond full employment at this point. Yeah, Marissa, Chris, any pushback there? I mean, are we all in the same? I mean, I think it's been well beyond, well below 4% for a long time prior to the pandemic. I mean, even prior to the pandemic, we had a very low unemployment rate and wage growth wasn't that high, right?

It was consistent with low inflation, right? Yeah, I mean, so I don't. You don't see it either. No, I don't see it. Interesting. Yeah, Chris? Yeah, I'd agree with that. It would.

I mean, the wage growth is above equilibrium, so maybe we are a bit. You could argue that we're a bit beyond, but it's not screaming. It's not accelerating to Dante's point. Yeah, okay. All right, well, let's turn to a couple of those issues that are, you know, more dark, you know, threats to, you know, what's going on here. The banking crisis, we've been talking about that, you know, quite a bit. Chris, any update there? I mean, I know you watch the data very carefully. I mean, one thing that I find a bit spooky is the regional bank

stocks are still under a lot of pressure. I won't name names, but they're, you know, they're out there. They're up today, I guess, but I don't know if that's a trend. But just after all of the government support here, the step, stepping in and guaranteeing the deposits of folks with deposits below the insurance limit and above the Fed's bank term funding program to provide liquidity to the banking system, the very aggressive resolution of troubled institutions by the FDIC, a pretty muscular government response. I had been hopeful that that was it, that the crisis was, at least the acute phase of the crisis was over. But I'm a little nervous about that in the context of these bank stocks under a lot of pressure.

What do you think? How worried are you about this? Or do you think this is just short sellers looking for an opportunity and they'll get rung out? Yeah, that's where I was going to go. I think there's, I mean, it's all psychological at this point. The balance sheets of these banks actually are still pretty good for the most part, right? Obviously, there are issues there in terms of marking down the value of bonds or potential CRA issue, credit issues in the CRA market.

But taken altogether, there's still lots of capital. These banks are really well run. And I see more of the psychological and the speculative nature of this feeding on itself, right? You have the short sellers in there. They bring down those stock prices. then the depositors start to get nervous. There are real implications if your, you know, if your equity value goes down. So it can feed on itself and depositors could flee.

But I don't know. So I think we're still in the, in a gray zone here in terms of that self-fulfilling prophecy continuing to occur. And although the government has been robust in its response, has still been on a pretty much on a one-off basis. So there's plenty of anxiety still out. there among investors and depositors. You know what I'm perplexed by and maybe you've got some insight here is, you know,

the bank term funding program. That's what the Fed calls it. They, that's this facility they established back in mid-March when things were unraveling. And this allows banks to borrow cash from the Fed using their mortgage and Treasury securities as collateral. but the twist here is valuing that collateral at par, meaning not at the current market value,

which is a lot lower because of the run-up and interest rates, because the securities they purchased have coupons, interest rates that are well below market value, and therefore their values a lot lower. And there has been some meaningful borrowing. Last I looked, it was 80, 85 billion outstanding in that program. And the Fed recently, I think recently, or maybe regularly, releases the names of the banks that are using that facility, how much they're borrowing,

what percent of their liabilities, you know, their total funding is coming from that program. And you look at that list, it feels like, you know, tailor made for those short sellers to go in and go after those banks. And moreover, the banks know that. And it seems like the stigma of going to that facility is so high, I would think, at this point that they are very reluctant to go to it, which exacerbates their funding problem. So can't, do you, do you have any insight here? Why would the Fed, maybe they have to do this?

I don't know. Do you know, do they have some kind of regulatory or legal requirement or is this voluntary? Do you have any sense of that? They disclose. There are other programs where they disclose, but it's with a lag, right? I think so, like the discount window, right? Yeah, that's right. I just find this so bizarre that they would be.

I guess you have these competing theories, right, are forces. On the one hand, you want to be transparent. And by being transparent, you assure the depositor or the investor that this bank is well run. All cards on the table. Look, everything is there. But then on the other hand, you're right, there's the stigma. If you're the only guy going, if you're the only one going to this facility, right? It sends a signal as well.

Yeah. I guess what they should do is have all the banks. JP Morgan, everyone should go. Should borrow, at least something. Kind of like during the financial crisis. Exactly. That's what they made. Everyone go.

Yeah. Right. Huh. So your sense is, though, that this is short sellers, other speculators kind of driving the stock prices down, that the fundamentals here are, you know, obviously the banks are under a lot of pressure, but they're fundamentally in good shape because they've got a lot of. a lot of capital, and they got the government support now. And that at some point here, that is what prevails, that investors say, hey, you know, these banks are pretty solid. These bank stocks have gotten driven down to such low levels that this is an opportunity. So value investors, so to speak, come in and shore up the bank stocks. And we don't get into this

kind of doom loop where bank stocks go down, that spooks, depositors. who flee the bank, who then cause the bank stock to go down further and you get in this kind of self-reinforcing vision cycle. That's your kind of sense of things here, that that's what's going to happen. It is, but there's definitely risk there, right? Yeah. So, yeah, I'm saying, effectively, I'm saying there's going to be some type of short squeeze here that, you know, the shorts are going to go down, driving things down, but then you do have

another class of investor and depositors say enough, you know, I'm fine. FDIC is covering me and they don't worry about it anymore and the prices start to shoot back up. But in the meantime, things can get out of control, right? They can feed on themselves pretty quickly. Yeah, right. Do you think that the government has some role to play here to stop this if this does become a downward spiral? I mean, because it sounds like what you're saying is this isn't warranted by fundamentals, right? And if banks just keep falling and the government has to come in and insure all these uninsured deposits, I mean, where does it end?

I got a few ideas. Chris, what do you think? Yeah, well, I guess to the question, the basic question. Yeah, I do think government has a role to play here. If they let this get out of hand, they're going to have to pay a bigger price later on, right? You could go all the way to a bank holiday if it really comes down to it. So I think speaking forcefully, you know, with confidence, that certainly is the first thing to do here. Then we can consider the broader, more blanket guarantee of more accounts by the FDIC just to quash any concerns here. But yeah, I think if you let this, if you let too many of the dominoes fall, then they will. start to really fall in on themselves and need to avoid that.

Well, the first thing I do is I'd lose that list somewhere, you know. Oh, yeah, where's that list? I can't find that list. I'll get back to you on that and come back, you know, a month later with the list. Yeah, or release it with a lag or a long lag or something. Exact the Mundo. That's, yeah. I'd say at least a month.

Like, the second, I, you know, I would, and I'm not sure I understand all the unintended consequences of this, but I would seriously consider not allowing short selling of banks, you know, kind of sort of what happened during the financial crisis, because the SEC securities and exchange commission, I think 800 banks, there were 800 banks that short sellers could not short for a period of time. because they had a similar kind of problem back in the financial crisis where we're getting into that kind of doom loop I just described. And then I think we really need to take a look at deposit insurance. I'm not increasing on the mind.

And again, here I've got to think about it more deeply and there might be more unintended consequences than I fully appreciate. But I consider putting deposit insurance on all deposits, particularly business deposits. And that's where you have a lot of uninsured. are big deposit accounts uninsured, but businesses are using them to make payroll and just operate their business. And I don't really see the logic for not having deposit insurance on all deposits is you want the big depositors to be careful where they put their money, which bank they put their money in, and that by so doing, disciplines the bank to not take untoward risk. But I just don't think that happens. I don't think depositors are really paying it. They're operating their businesses,

their households. They're not, they're not paying attention to the, is that a good bank, a bad bank? And they don't have the ability to judge that. That's really on the shareholders and the debt holders of that bank, the other creditors, not the depositor. So particularly in a world where people can move money instantaneously and you've got social media egging people on, you know, just fanning the fear. and in that context, I'm not really sure, you know, we want the same kind of deposit insurance system we've had in the past. We have to pay for it. You know, you've got to pay for the deposit insurance. The banks have to pay for it. And, you know, they have to pass that through in the form of lower deposit rates or higher loan rates. You know, I get it.

But I think that makes a lot more sense than this artificial 250K. That doesn't make sense to me. I don't know. I've got to think about that more carefully. Chris, on the fallout. Oh, sorry, go ahead. I was going to say clearly on those transactional accounts, like the payroll accounts from businesses, right?

You're right. It's just transact- They're not looking to, they're not studying for yields in a bank. No, and they're not, and they don't have time to study the bank balance sheet, right? They're just operating their businesses, right? I wonder, does this increase the, the the logic of a central bank digital currency?

I mean, if he had a CBDG, less, he wouldn't have bank. Deposit runs, right? I mean, well, you wouldn't have banks. Fill in the blank. I'm just saying all else being, I'm not a fan of the central bank digital currency,

but it feels like this might be an argument. You know, one argument at least that that might be some value. Can you explain what that is? Basically, your deposit account sitting at the Fed, not in the bank, not in the banking system. Kind of sort of what the Chinese, I think, now do. Lots of different concerns about it. One is just privacy.

If you're doing business directly with the Federal Reserve, the government has access to your financial information. And do we really want that? I'm not sure. You know, but we should have a podcast on CBDG. We'll do that. We're already pretty close with these money market funds. Yeah, that's an excellent point. Structure, right?

Yeah. Do you want to explain that? That's a little complicated. That's a little bit in the weeds here. But yeah, you have these money market funds, right? Traditionally, they invest in all sorts of short-term assets, commercial paper, treasury securities. There's also a reverse repo structure, which I would.

won't get into, but essentially it's a loan to the Fed, to the Federal Reserve. So you have these funds that go into the Fed, they get a, in return they get a bit of yield. So if you have this money market fund that only had this type of structure with the Fed, essentially you don't have the FDIC insurance cap that you're talking about because the Fed is going to pay, right? There's no question of not getting your funds back. And you're getting some yield there from the reverse repo structure. So effectively, if you are a depositor, you can circumvent the bank. You don't have to go through a commercial bank.

You go into the money market fund and you're getting full coverage on your deposits through the Fed. Yeah. Okay. A lot to untangle there. Maybe next week in the podcast where you can talk about what this all means for lending and economic activity. Because by then, I think we get the senior loan officer survey data, right? Marissa from the Fed. That's Monday.

Next week. It's on Monday. Okay. And that's a survey of loan officers at banks. And we get a better sense of how they're thinking about underwriting and how aggressively they've tightened their standard, which obviously is key to loan growth, which is key to economic activity. But come back to that. I want to play the game. And then I want to come back and talk about the debt limit a bit because that's now top of mind.

And then we'll call it a podcast. But let's play the game. Is that sound okay? Does that sound like a fair? Okay. Mursa, tradition has it that you go first. I don't know who set that tradition. I mean, I believe you did.

Did I do that? Okay. I think you did that. I think it's I like the tradition. What do you think? I like it. It's good. You're actually.

It's good for me because then it reduces the odds that someone steals my statistics. during the game. That is a reasonable point. So I like that. Yeah. And you're so good at this game. I mean, I want you to put your hands up, though, during the game like this.

You got to do this. No hands. I don't want any hands down here. I'm not. Hey. I just saying, you are really good. You are so good. You're so good.

You're really good. Okay. But I'm going to play hardball today. Okay. I'm in the game. What does that mean? That means I'm going to win is what it means. on the game.

Actually, what it means is I'm going to lose miserably, but I will give it a shot. Okay. All right. So you're up. Okay. My statistic is 4.7%. Is it a jobs report? Yes.

Is it payroll survey-based? No. Household. There must be household survey-based. Okay. And is it a percent of labor force, the 4.7? Is it a demographic? Yeah.

Yeah. It is a percent of the labor force. Why did you pause? Unemployment rate. It's an unemployment rate. Oh. African American. Yes.

Oh, okay. He's looking it up. I can tell he's looking it up. Oh, what? Oh, my gosh. Oh, my. My gosh. Oh, 4-7. Is that a new low? That is, so that's the, that's the unemployment rate for blacks. And it's the lowest it's ever been. And the data goes back to 1954. It's been, it's been trending lower. And if we also look at the participation rate is 63%, which is high. I mean, it's, it's the highest it's been in, you have to go back to, like, the late, 2000s, I think, to see, or I'm sorry, the late 1990, 2000 period to see a participation rate that high.

So the gap between the white unemployment rate and the black unemployment rate is the lowest now that it's ever been. It's under two percentage points. And then this is also, if you look at Hispanics, too, it's not quite an all-time low, but it's near there. And the data there also goes back to the 50s. So all demographic groups are looking pretty good. This goes to the high intensity of labor market, right? I mean, this is high intensity meaning the labor market is tight. We're full employment. We've been there now for at least a year.

And it's drawing everyone in, including groups that have historically been kind of on the periphery of the labor market. They're now, they're in. They're fully in. Yeah, and wage for two, right? Yeah. Drawing people in. This is one of the, this is one of the key benefits.

of having a labor market like this because you are now bringing people in that typically have a hard time staying into the labor market. Yeah. That's a great statistic, a very good one. Do you want to go next? Yeah. Negative 2.7%. Negative 2.7% in the job report. No.

Oh. A lot of good data this week. There was a lot of good data this week. Is it from the jolts? It is not joltz, no. Is it labor market related? It is, yeah. Oh, it is.

And is the government release? Oh, productivity. Oh, there you go. Yeah. I was waiting. I was taking the shot directly at Chris. So I was waiting for him. Yes, I got it.

I got it. Chris is on fire. Way to go, Chris. Yeah. So, okay, so explain, Dante. So productivity growth was down 2.7% in the first quarter. That's, you know, the stat, really, I think, is more important is if you look over a slightly longer time horizon since it's pretty volatile quarter to quarter. If you look at the

average since the end of 2019, it's 1.1% now over the last, whatever that is, three and a half years. And if you compare that to the two years leading up to the pandemic, the average was 1.8%. So we've gotten a lot of volatility and productivity since the pandemic, but all in all, it's averaged out to basically 1%, which is pretty significantly lower than it had been in the two years leading up to pandemic. I think he's cherry picking dates, Chris. It sounds like it. He's cherry picking gate. Yeah, I mean, even if you go back further, blah, blah, blah, blah. Before the pandemic, you know, a little bit lower percent if you make the average a little bit wider. But, you know, from since 2019 Q4, it's only 1.1% average productivity growth. So I calculated, I calculated over the past

three years, 2023 Q1 to 2020 Q1 being the start of the pandemic. And it's 1.2% per annum. And I go back the previous three years, I thought it was like one and a half percent per annum. Yeah, I think if you go a little wider on the back end, it gets a little bit. So three years, three years since the pandemic hit three years prior to the pandemic. It's a little bit on the soft side recently. You know, I think goes the output is definitely weak. GDP growth is slowing. Output growth is slowing. But as we can see in the labor market, the businesses do not want to lay all. They, they, they're not interested in reducing their payrolls. despite that. So it's kind of cutting into productivity. So, but you're, you're,

productivity growth skeptic. That's the point here. Correct. Yeah. I've long been, yeah. I mean, I've been on the, yeah, the low end of where I think productivity growth is headed here over the next few years. I think it's got a whole lot of room. Since I got you, I'm going to ask you a question I'm getting like with every day. What about AI machine learning? You know, isn't that going to like upend the things? I mean, the productivity gains here could be enormous. to the degree that this is almost dystopic. We're going to have not a tight labor market. We're going to have way too much unemployment out there.

How do you respond? How do you think about that? And how would you respond to that kind of concern? I think my response, whenever I'm thinking about productivity growth and somebody mentions a specific technology, my answer is always that it's going to take a lot longer than you think for that actually to play out in terms of productivity growth. So if you were asking me about productivity growth in 2030,

maybe AI plays a significant role in productivity growth then. I don't think over the next couple of years. And I think of anything, a big disruptive technology like that has the potential to reduce productivity growth in the near term, right? Because you have lots of companies expending energy and man hours trying to figure out, does this work for me? And for a lot of them, it probably doesn't. And they just wasted how much time and effort trying to figure out if they could get some

lift out of it. So I think of anything, it's probably a headwind right now. I saw Marissa smile. Marissa, is that we've got some experience with this, don't we? Yeah, I mean, we have our own experience here and just like other companies that are trying to see if there's benefit and maybe not finding it right away.

And that doesn't guarantee you won't find some eventually. But yeah. Yeah, I'm confident we will, but to your point, it's not straightforward. You got to work at it. It's going to take some time. In the meantime, it's a bit of a distraction, actually, right? Because you're trying to figure it out.

And usually, even when there's a disruption with a major technology like the Internet, right, yes, it will destroy some jobs, but it will also create a host of jobs that we can't even envision yet, that goes along with that to support that. But to Dante's point, that takes a long time to play out. So, Chris, you're the productivity prostititizer, I believe. Yes. Yeah. So the evangelist, yes.

The evangelist. That's the word, the evangelist. So how do you react to Dante's punch to the gut here? Or maybe the poking. He's poking the bear here. He definitely poke the bear, right? Yeah. Yeah.

But, yeah, it's a short-term phenomenon, right? If you look at the longer term, these technology, We haven't even figured out how the smartphone really enters the economy, how we productively use it in all of its different ways. New apps being generated every day. So I think there's long runway here. So yeah, you're right. If you're just going to look at the next six months, sure.

But did you guys ever bed? A little farther out, Dante, and things will pick up. Do you guys have a dollar bet on this? I can't remember because, Dante, I'll just say, don't, don't bet them. Just don't do it. What's the bet? Whatever it is, don't do it. For 10-year period.

So you're going to pay each other a dollar in 10 years? Yes. Well, no, and actually, we never pay. I definitely never pay. I definitely never pay. I definitely never pay. Can we put an inflation clause on the dollars at least worth something? Right.

No, no. Escalator. It's so funny. Okay, Chris, you're up. I'm up. Let me find it here. 6.4%. 6.4% in the jobs numbers.

Is it an unemployment rate? No. Is it labor market related? It is not labor market related. I'm going off the script. You're going off script. It did come out this week. It did come out this week.

Is it housing related? It is. Oh, what came out in, oh, you're not going back to that Fannie Mae. No, no, no. The Fannie Mae survey, that kind of thing. That's a good one, but no. Instruction spending, something with construction spending. That was really.

No? It's not mortgage apps. No. No house prices is not house price related, is it? No. This is one of you. Oh, it's housing vacancy survey. It's the rental vacancy rate.

Ding, ding, ding. Oh, I. I had to sneak that in before. No, you know what? I was going to say it's the mortgage rate, the prevailing mortgage rate. Oh, that's a good one. That's a good one. Yeah, that's a really good one.

But the rental vacancy rate, right? Yeah, that's right. Go ahead. That was a great, that's a great statistic. Go ahead. It's up. Right. So obviously, rental vacancy rate percentage of rental units that are vacant unoccupied.

It climbed up to 6.4. It had been 5.8% in Q. is a quarterly number. So it is, that's a pretty sizable jump for one quarter. And it does, to my mind, point to some of softness certainly in, in the housing market in terms of affordability, people pulling back in terms of forming new households and occupying new rental space as well as new supply coming on. We've talked in the past about this very large number of multifamily units that's under construction. So this, uh, this, uh, this rise in the vacancy rate, certainly put some downward pressure on rents.

That's a good thing for consumers as well as for inflation outlook. So that's a positive. I guess the negative might be on the CRA prices, commercial real estate prices and what that means for banks. Yeah. Yeah. It depends on your perspective. Yeah.

Yeah, a lot of data in that report that has an vacancy survey. The homeowner, here, okay, bonus. what is the homeownership vacancy rate? Oh, the homeowner? I got a right. Oh, homeowner. I should say the home, sorry, the homeowner vacancy rate is 0.8%. Oh, you got to write in front of you.

It's in the same release, Mark. Yeah. And of course, the home ownership rate, that's the percent of households that own their own home is 66 percent, right, right, on the nose. Interestingly, though, that goes up, that goes down. But for the last 50, 60 years, it's basically. unchanged, right? Well, when it got up to 70, then it... It's too high, I guess.

Unsustainable. That's the crisis. That was the crisis. Yeah. So I'm saying... It feels like it's kind of... Right. No matter how we try, whatever policy you put in, doesn't matter. It's still 66%.

Yeah, one way or the other. Interesting. Okay. All right. Should I go? Yeah. Yeah. Okay. And as I'm wanting... to do, I don't stick with one number. I give multiple numbers that are related. That's a hint. So ready? 4%. 1.2% and 2.5%. What do you think? Do you give you a hint? The employment report or no?

Not from the employment report, but labor market related. Okay. From a release that came out in the past week? 4% was the first one? Yes. That's a quit rate, right? Oh, you're barking up the right tree, but you go. It's jolts. It's job opening labor returner survey. So the quit rate is 2.5%.

Oh, no. Oh, it's 4 million. That's okay. Yeah. So what's 4.0? 4%. Is that the openings rate? That's the hiring rate.

Hiring rate. Hiring rate. And what's the 1.2? This should be easy. Layoffs. Layoffs. Right. And this is a rate. So it's the number of, let's say, hires as a percent of the labor force is 4%. And the reason I picked this was those percent's, those rates are consistent with what pretty much with what they were pre-pandemic. So pre-pandemic, led market was tight. We had a hiring rate of 4 percent. We had a layoff rate

of 1.2 percent. And we had a quit rate of 2 and a half percent. So we've come full circle. We're back kind of sort of where we were pre-pandemic consistent with that type labor market. The one thing that stands out, and you mentioned it, was the number of unfilled positions. There's still, that's still very elevated, but that's coming in really fast. So the peak in the number of unfilled positions was 12 million. I'm rounding, obviously, back a little over a year ago. We're now at 9.5 million, 9.6 million.

And pre-pandemic, it was 7.5 million. So, you know, almost it feels like the labor market is, you know, I think that's the kind of the theme that came out of today's jobs numbers is normalizing. It's getting back to something that's more typical after obviously being completely upended by the pandemic and, to some degree, the Russian war in Ukraine. So what do you think? Reasonably good. I know it's hard, but, you know, not too bad. Okay, let's end the conversation around the debt limit. And as I said, I was in Washington this week and at the Senate Budget Committee testifying, and we've done a lot of work in this area.

And I just want to lay out because, you know, the other question I'm getting every day now other than AI machine learning is, how's this debt limit thing going to be resolved? Now, just exactly what is the kind of the path forward. And I want to kind of lay out my thinking on that and get reactions and see what you guys think. And as you know, Bernard Yaros does a lot of good work here. We've identified that the so-called X date, the date when the Treasury runs out of cash necessary to pay all the government's bills on time is June 8th, June 8. It could be as early as June 1, but by our calculation, the Treasury will have just enough cash to squeeze by and pay all the bills in June 8th. And if June 8th is not the date, and there's some possibility that it's not, it could be as late as August 8th. So the X date.

Who's birthday? My birthday. Oh, it is. Okay. Well, we really don't want it to happen. The Treasury runs out of money. We really don't want that to happen. Yeah. Although I will remember your birthday forever.

Eight, eight, that's auspicious. Oh, yeah. Why? Why? Exactly. Why is it? I think eight is a memorable number in China, in Chinese. You're making that up. That's why the Olympics was to 888, right? Oh, that's right. You're right. Yeah, I forgot about that. Okay. Right, Marissa? You should know, right? It is a lucky number. Yeah, yeah. It is a lucky number. It is, yeah. Why are you being so cool? I'll take any gifts that when anyone wants to send my way or good wishes.

On August 8th, I tell you now, I'm going to remember that forever, the August 8th birthday. I can't even remember my own birthday, but I'll definitely remember your birthday. Where was I? Oh, August 8th, would be the latest. June 8th is the X date. So here we are, you know, May the 5th, we got about a month, you know, how's this going to play out? without disaster, without lawmakers not increasing or suspending the debt limit in time. We get up to June 8th and we breach it.

Someone doesn't get paid. I will say, I don't think there's any probability that bondholders will not get paid, at least not initially. The Treasury has the ability to cut checks to bondholders through the so-called Fedwire. rest of the checks are cut through a different accounting system. And I don't think the Treasury has the ability to prioritize or change that around. It's just too difficult from a programming perspective, but they can't pay the bondholder. So they will pay the bondholder. But it'd be complete chaos, you know, if we got to that point in time. So that's not our baseline. The baseline is slow economy,

weak economy, but no recession. And that's not consistent with breaching the debt limit. If we breach the debt limit, we're going into recession. It's going to be that chaotic. So what's the path forward here? What is the political, the viable political path forward to increasing the debt limit, suspending it before we breach? And my thinking is that lawmakers will, and they meet next week, President Biden's meeting with House Speaker McCarthy and others, that out of that meeting subsequently, I don't think it happens immediately after the meeting, but in the next week or two or three, lawmakers decide to suspend the debt limit and allow the Treasury to continue to issue debt to pay the bills. Maybe they kick the can down a month, but then they'll kick it down

another month and another month and they'll take it all the way to the end of the fiscal year, fiscal year 2023, which ends at the end of September. And the reason they'll do that is because they want to line up the decision around increasing the debt limit to the decision around the fiscal year 2024 budget and funding the government and avoiding a government shutdown, which would happen on October 1. And by so doing, they can pass legislation together, which would be. would increase the debt limit. In my sense is that the agreement would increase it for enough to extend it to the other side

of the presidential election. They don't want the, they don't want the debt limit to get in the, in the middle of the presidential election process because that would be a complete mess. And at the same time as increasing the debt limit, they also increase, they also pass a piece of the legislation that funds the government going into next year, fiscal year 2024. And both sides can declare rhetorical political victory. The House Republican, because in that budget, I'm assuming that there will, that's fair game. That's appropriate to discuss spending levels and taxes and the composition of spending.

That's all fair game. And now that will come some additional spending restraint relative to the current, the budget. And so the House Republicans can declare victory. They can say, hey, look, well, we were able to rein in government spending, at least to some degree. And the president can declare victory by saying, look, we passed an increase in the debt limit. That was separate from this budget negotiating process. So I got a clean debt limit increase. Both those things can happen. We can keep both those things in our mind politically, rhetorically, and, you know, Life goes on and we move forward.

One last thing I'll say, and then I'll turn it back to the group and see what you think, is that I don't think this happens without some real financial market turmoil. I think we're going to see some pretty dark days dead ahead where the stock market's going to be under extraordinary pressure. We'll see some gaping out of credit spreads in the corporate bond market. Treasury yields, I'm not exactly sure what happens there, but corporate spreads will widen the dollar. or might come under some pressure in this period. But it's in that turmoil and all that red that people see on their screen that generates the political will necessary to go down the path I just described.

So it's not going to be painless. It's going to be painful. But at the end of the day, they're going to get this done before we breach. And the pain that we suffer isn't going to be enough to push the – it's going to hurt the economy, but it isn't going to undermine it to the point that we get into recession. Okay, I laid out a pretty arduous path there because it is pretty arduous. What do people think? What do people think?

I'll turn to you, Dante, first. Do you have a view on this? Not a strong view. I mean, I agree that I don't see a situation where we actually breach the debt limit. I mean, you know, how we get from point A to point B seems like it's going to be a bit murky and not clear cut and there's not going to be a swift resolution. So, I mean, the idea that this is going to get kicked down. the road, the fall is not surprising, I guess, to me. It seems reasonable that it's going to take

a while to come to some resolution and, you know, hopefully they can come in an agreement where both sides can claim some sort of victory and, you know, save face, but ultimately we get done what needs to get done. So I think that makes sense to me. Yeah, it'd be nice if it didn't have to go that way to get to a resolution, but it's not always the case. So you kind of sort of buy into the scenario. Yeah, I don't have any reason. There's not a better, you can't think of a more likely path. Not given the current environment, no. I mean, I think there's a much easier path that is not a realistic one, but I think that makes sense.

Chris, I'm holding you at Bay here because I sense a different perspective. So I'm going to go to Marissa next. Marissa, what do you think about that path? I think that seems the most likely path. Is the administration still pursuing this constitutionality of, the debt limit? Well, you mean like the 14th Amendment, you mean? Yeah.

Oh, invoking the 14th Amendment saying that that's 14th Amendment of the Constitution. There's a clause in there that kind of sort of suggests that they might be able to continue to pay, issue debt on the other side of debt limit because if they don't, then they're not meeting the requirements of the 14th Amendment. it. I don't know that they're certainly not officially looking into that. I would assume there are lawyers, the lawyers in the White House are looking at it. It's a possibility. But that's a, that's a possibility if things got crazy and we actually did breach. But that's a pretty uncertain path, right? Because that would go to the Supreme Court. Who knows how the Supreme Court's

going to rule? Could take a while. And during that period, it would be pretty mess. I would think enough to push us into recession. Okay, Chris, what do you think? I think what you've laid out is a very rational, logical approach, but there's the political element here. And I think you do have this damn the torpedoes contingent of the Republican Party that is going to make this much messier. So I would say we're likely not to breach. That's still my baseline as well, but I think we're going down to the wire. So you and I and Bernard Yaros wrote a paper going down the debt limit, what was it called?

Going down the debt limit rabbit hole. And we laid out these different scenarios. And if you add up all the scenarios where we breach the debt limit, it adds up to we assigned a probability of 5% to all those possible scenarios. And that's everything from they breach for a day or two, financial markets lose their our mind, they reverse course like they did with tarp the bailout plan back and the financial crisis sign on the dotted line and we move forward to. We breach and it takes them weeks to resolve and increase the debt limit. And obviously that's a much darker scenario. If you add up all of those scenarios, we attach to 5% probability to that, 95% probability to something

consistent with what I just articulated. It's going to be messy, but at the end of the day, it gets done before there's a breach. Does that? 5% sound right to you at this point? I'm a little bit more pessimistic. More pessimistic. We go down to the, right? Mistakes are made, right? Yep.

There's this big game theory going on. Game of chicken that's going on here. And, you know, a false move there could certainly push us over the edge. I don't know that we, the prolonged breach scenario is certainly impossibly, but a more likely scenario if we did breach is that it would be relatively. short-lived, right? Financial markets really do crater, you know, angry constituents are calling their Congress people and finally they put together some deal. So I think that's more likely than the extreme, you know, this drags on for months or weeks at a time. I guess what I worry about, part of your argument here is that we do need a financial market melt on with some sort of

or at least some. I worry that there may be some complacency built into the system here, right? Investors expecting things to work out. So you don't actually get that decline that you would need to trigger the reaction. There's, again, another game-throughetic argument here. And that's what may cause this to go right down to the wire. One thing that gives me a little bit of solace is there are cracks developing in the financial system, right? You can see it in short-term treasury yields on short-term treasury security.

So they, very near, very short, short, one month, the yields have fallen as security, relative to where they were a month ago. As investors are thinking, oh, I will get paid in the next month. The X date is, you know, although that's coming to an end here pretty quickly because we're running out of days. And you can see it in CDS, credit default swap. That's the kind of the insurance premium. You can go out and get insurance against the default on the treasury. You have to pay a premium. It's called the credit default swap spread.

And that's now very wide relative to historical standard. It's not a very liquid market, so hard to read a lot into it, but nonetheless. And you can kind of look at treasury yields around these different X dates that we described earlier. They kind of jump at those points. So investors are starting to take it in, at least in the money markets. So some soul is there that we're not completely complacent, but I hear you. Maybe you need a lot of red on the screen, I think, to get lawmakers to move.

Yeah, what are you thinking in terms of the amount of red? Because there's a lot of red already because of the banking crisis, right? So in investors' lines, they might not be separating out these two effects, right? Yeah, I think the model is 2011. The last time we had a pretty ugly debt limit battle. And I think there was a day or two. The market was down on the Dow, a thousand points, you know, something like that. So you bring that real, you know, and the Dow was a lot lower back in 2011.

So we could be down 2,000 points, you know, to provide context. So something like that. Yeah. Something pretty serious. Yeah. Okay. Which then leads to, well, isn't that going to undermine confidence and wouldn't that push us into recession?

And so I think it's going to be, feel very uncomfortable here, you know, for the next few months. Yeah. I don't think I want to go down the path of, and the conversation that we have in the past asking probability, recession probabilities. Should I or do you want to just hold that off? This is already getting to be a long podcast. What do you think?

Marissa, should we? Well, I was just looking at our poll results. Oh, let's do that. Let's end with what the rest of the gang thinks. We had a macro meeting this morning. Macro meaning U.S. macro. We all get together. and talk about the outlook and the underlying assumptions in that outlook, including what we thought

about the debt limit. And we have been asking participants in that macro meeting what they think the probability of recession. What's the question exactly, probability of recession over the next year? I think that's what it is. Can you tell? The next 12 months. Next 12 months, yeah.

What's your subjective probability of recession in the U.S. over the next 12 months? Okay. I was going to say maybe we can all guess what that is, but that's like taking it too far. So what is it? What is the group think? Well, there's no majority, but the plurality, so 47% of respondents so far have put it at 50% to 60%, which I think is where most of us are. Mark, maybe.

Are you under 50%? I'm under 50. You are? Okay. Next 12 months, what's the question? Next 12 months? Oh, next 12 months. Oh, right.

It could be 50. It could be 50. 50%. Yeah, you're right. I'd probably be in that group. Yeah. What about the one below that? So then the next highest response was 60 to 70 percent.

21% of people said that. Then it was 40 to 50% at 15%. Okay. What was the 60 to 70? And one person said 10 to 20%. Oh, God, I'd like to know who that is. That's probably Dante. I don't think so.

I'm not that optimistic. Oh, that's interesting. I wonder who that is. That should be a game for next time. Who that is. We'll invite them on. Oh, that's a good idea. They'd have to fess up.

This is an anonymous poll. I know they'd have to fess up, but that would be kind of interesting, wouldn't it? It would be interesting. It would be interesting. Anyway, all right, anything else, guys, before we call it a podcast? going going okay gone all right we're going this a podcast uh i hope you thought it was useful enjoyable

and we will talk to you next week take care now