Moody's Talks - Inside Economics - Return to Work and Recession Odds

Episode Date: June 3, 2022

Mark, Ryan, and Cris welcome back Marisa DiNatale, Senior Director at Moody's Analytics, to discuss the May U.S. Employment Report. They also debate whether the economy is strong or weak and if it's possible we can talk ourselves into a recession.Follow Mark Zandi @MarkZandi, Ryan Sweet @RealTime_Econ and Cris deRitis 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 Sandy, the chief economist of Moody's Analytics, and this is Jobs Friday. This is the day we get the report on employment. And this is for the month of May 2022. And we've got the usual cast of characters. We've got Chris, Chris DeReedys, the deputy chief economist. Ryan Sweet. Ryan is the director of real-time economics. And Marissa, Mirza Dina Talley, who joins us. regularly on jobs Friday. We're missing Dante. Where's Dante, guys? He's on vacation. Oh. Do you know where he went? He went far, far away because of ADP.

Ouch. Yeah, that, oh, man, ADP was really weak, wasn't it? There was. I think ADP, that's the, we put together the data based on ADP payroll records. And it came in at, what, $128,000, something like that?

Yeah. Okay. That was low because the number was, Marissa, what was the number for the month of May in employment? The non-farm payroll employment rose 390,000. 390K. Yeah.

Okay. So let's just dive right in. So what do you think? Want to give us a sense of the report? Yeah. It was another very good one. Job growth slowed from previous, what we've seen in previous months.

but, as I just said, rose 390,000 in May, which was well above, I think, what most people were expecting. For the first time in a while, the revisions to the two prior months were actually negative combined. So the estimate for April was revised down by 30,000 jobs. So instead of a 428,000 gain, we got a 398,000 gain. and the change for April was revised up a little bit by 8,000. So combined March and April were 22,000 lower than they were previously reported.

So on the payroll side of things, it seemed to be more that a mix of industries adding and subtracting. So we got a very large gain in leisure hospitality, where jobs were up 84,000 in May. we got a very large decline in retail trade. So retail jobs fell by $61,000 in May. We had an increase in construction, which was kind of big compared to the previous months. Like last month, we got no change in April.

We got a big increase in professional business services and transportation. So it was a pretty broad-based, increase on the payroll side of things. Education too, right? Right, Ryan? Yeah, and education in state, yeah, state education payrolls rose as well. Yeah, that government number surprised me. It was really strong.

Yeah, and that was mostly education. Correct. Am I correct? Okay. And we're still down, despite it all, we're still down about 800K from the pre-pandemic peak. That's right. That's right. So we're almost there.

We're about half a percent below where we're. we were prior to the pandemic. Okay, so before you move on, so what is underlying job growth, you know, abstracting from the vagaries of the data? What do you think it is? Monthly job growth? Well, it's, I think it's weakened a bit in the past few months. We've seen, we've seen some cooling off in the pace of job growth. It looks like it's about 400,000, a little above 400,000. It's been about 500,000, right? The past several months. So, yeah, if you just look at moving averages,

it looks to be a little bit above $400,000. Right. Which is incredibly strong still. Yeah, yeah, but it's down. I mean, I think the average monthly job growth in the proceed, take the past three months, it's about $400K, take the preceding 12 months, that was $560K. So that's boom-like.

So it's still boom-e, but not nearly as boom. Boom. What should I say there? Boominess as it was. Less boomy. Less boomy. That's the right word saying. Yeah. Yeah. Hey, anything in the retail numbers? Is that, what is that? Is that seasonals or is I, are we just going back to pre-pandemic retail, Brick and Moore? I wanted to talk about that maybe. I mean, I'm sure Ryan has some thoughts on that.

If you look at not seasonally adjusted, it also fell. What fell? It's unusually. It normally rises in May, but it fell. So this is a really bizarre number. Yeah, maybe we can get into it a little more. But it's the first time the not-seasonally adjusted retail number fell in a May since the 1960s. Well, maybe that's just the normalization in spending patterns, right? Yeah, it could just be that spending was pulled forward and things just aren't happening in their usual. So in the pandemic, we stayed home.

We stayed at home. we bought stuff, goods, you know, things. And now that we're reopened and traveling, we're buying less stuff. So you would expect those retailers like building, building material and supply stores. I didn't look at it. I'm guessing that's, was that down? Yeah, that would be consistent with that, right? People are.

Yeah. Half the decline was in like the big box stores, like Costco's and targets and stuff like that. that was almost 30,000 of the 60,000 decline in retail. Right. And Target and Walmart reported on their quarterly earnings that they're seeing shifts in patterns that they have more inventory on the shelves than they had expected.

So it's consistent with that shifting. Shifting spending behavior. Yeah. You're going to start to see this in the retail sales numbers. They're going to start to be really, really weak, but that only tells, you know, a third of the story. You know, real services spending is picking up. also you saw in today's numbers i don't think i don't know if you mentioned reversal but transportation

warehousing employment increased a lot i think didn't it yeah i know a lot of it was trucking trucking okay okay good all right i stopped you you were talking about one aspect of the data today that was the non-farm payroll data the business based on the survey of businesses we also got data based on the survey of household. So what did that have to say? So the big headline number, the unemployment rate stayed at 3.6% for the third month in a row. And if you go out three decimal places and you look at the unrounded number, it fell a tiny bit. Both the labor force participation rate and the employment population ratio ticked up by a tenth of a percentage point. Let's see, else. The number of people, this was sort of interesting. I don't want to make too big a deal out of it,

but the number of people working part-time for economic reasons rose. And it was all people saying that their hours were cut back by their employer because there wasn't enough work to do. Not the other piece of that could be that people were looking for full-time jobs, but they could only find part-time jobs. It wasn't that. It was it was hours cut back. What about our, I didn't look at hours per weekly hours. Do they get what happened to those? I think they were, let's see. Do you know, Ryan? Or unchanged. Unchanged, okay. Yeah, I think it was 34.6. Because that would be a leading indicator of weaker job growth debt ahead. Businesses pull back on hours before they cut jobs. But not yet. And average hourly earnings grows,

10 cents over the month. They were up. Do you know what the percentage? 5.2. Yeah, year over year. That was year over year. Yeah. 0.3% month over a month. But it's moderating though, don't you say?

Wage growth? Yeah, but because of the composition of job growth this month, I wouldn't put tons of stock in that moderation. But it feels like even accounting for the mix effects, this thing's going to roll over on a year-over-year basis, right? just the base effects because we're now getting to a place where we had pretty strong wage growth a year ago. So it feels like a start to come in. I think the employment cost index is right around five.

Yeah, it's around five. It is. Yeah. They're all pretty consistent with each other. And the employment cost index controls for the mix of jobs for what's going on across industries and occupation. So that's the higher quality. Quarterly series is because it takes a while to construct it. This data we're talking about the average hour of learnings is coming out of the monthly jobs numbers.

But they're consistent now. Right. Yeah. Okay. Anything else you want to call out in the report, Marissa? I don't. You know, I noticed, you didn't mention participation. I don't think that picked up a little bit. But you know what I found interesting is labor force growth, which is, you know,

participation times working age population. That's growing very strong well over 2% year of year. And that's about as strong as it gets. I mean, typically it's well below one. So that feels like we're getting some bump from higher participation, but also it feels like working age population growth is kicking back. And maybe that's immigration. I don't know. But I thought that was.

So it's not only about job growth slowing. It's also about labor supply growth accelerating. And both those things are positive in the context of a tight labor market and the high inflation. We want to get inflation down. Right. Okay. Ryan, anything to add? You want to fill any holes or add any color to what Marissa had to say?

Well, the prime age employment to population ratio. Oh, yeah. Five to 54 ticked up from 79.9% to 80%. Okay. There's still room for improvement, but we're headed in the right direction. Kind of the idea of are we at full employment? Yeah, probably not because that could go a little bit higher. I think the number is overall a little bit misleading.

The seasonal adjustment factor was very, very favorable in May, a lot less. or a lot more favorable than in past May. So favorable to participation or? Oh, no, to the overall job growth. I'm sorry. Oh, overall. I think what we're going to see is, you know, continued downward revisions,

particularly since the response rate was really, really low. And it continues to remain low for the first print. So, you know, it's close, but it's, you know, we know these numbers aren't 100% accurate on the first print. So what was the response rate? I can look it up. I think it was in the 60s. You know, I think the whole world has survey fatigue.

I'm just telling you. I think people are just tired of surveys. I mean, I get on a flight, I get off the flight. How do we do? You know? Yeah. I just like I'm burnt out. I'm burned out.

You know, I think we have our own survey of our employees, you know, how are you feeling? The so-called BES survey. What does that stand for again? business effectiveness survey. Business effectiveness survey. And I think our survey responses are, well, last I looked, they're pretty low. I think people are just burnt out, you know, from all these surveys, which has all kinds of implications, doesn't it, you know, for the data?

For the accuracy, right. Yeah. I wonder what that means. I mean, the good news is, you know, with each subsequent report, the response rate is increasing. So, you know, by the third time, the third revision, you know, the response rate is over 90% for the employment data. Oh, is that right? It is over 90%. Okay. So the revisions take on added importance, right, because we're getting a lot more data. Yeah, okay. Okay. Okay, very good. Chris, anything to add on the job numbers? I know you look into the bowels of this too. Not really. I think

Marissa and Ryan covered it well. Overall, pretty strong report. Hard to find. The retail was the one that kind of stuck out as a point of weakness. But construction was up. That was perhaps one thing to note. We now have construction well above what it was in February of 2020. So, you know, just points to, again, some strength of that industry, at least for the short term here. All right. The next few months are going to be, I was going to say that, you know, we likely aren't capturing the full impact of the recent weakness in residential investment.

Like housing structure down. mortgage rates are up. So construction is going to start to solve them. That's right. So short term, it looked like, or historically, it looked like some activity. But yeah. Yeah. So broad strokes, this is how I characterize the message and the jobs numbers.

I'm curious, you agree, disagree, that the job market is strong. 400K per month is strong job market. but it's slowing, moderating, and that's great. We need that because the economy, the job market's been too strong in the sense that we're going to blow past full employment here. Unemployment's going to decline. We're going to go past full employment, which is going to exacerbate wage and price pressures exactly what we don't need.

We've got to get inflation down. So we need the job market to slow. In fact, by my calculation, we need to get back down to something like $150K at most per month to be consistent with labor force growth and make sure that unemployment stabilizes so that we don't blow past full employment. And it feels like that's where we're headed here. And at the same time, we are getting some improvement in labor supply, good growth and labor supply is improving, and wage growth, still strong, but moderating. So when I look at this report, it feels pretty good to me. If I were writing the numbers I would want, you know, if I were

king on the piece of paper. It's not exactly what I want, but it's pretty darn close, you know, within spitting distance of what I would put on a piece of paper. What do you think? Do anyone agree, disagree with that characterization of the report? I agree. You agree.

Okay. Marissa agrees. I don't care what you guys say. Marissa agrees, I'm good. So the Fed would agree with you, too. You do think the Fed would agree with me. Yeah, this is what they want. They want things to slow down.

So is it slowing down enough, though? Yeah. Sounds like you're saying yes. Well, I think they want to change the monetary policy. Yeah, I don't think you want a sudden, the seller, like an abrupt one. I think they wanted to occur over a few months and then settle down into a sustainable pace. So, so you, Marissa likes it. Ryan, you like it.

You think you're the Fed whisperer and your Fed whispering suggests they like it. Chris, what do you think? I like it. Yeah, definitely. There's nothing. The stock market. And bond market were, didn't quite like it. I mean, it wasn't they didn't, it wasn't a big sell off. And they didn't hate it. They didn't hate it. But bond yields, long term bond yields, 10 year treasury yields have risen back five, six basis points. Not a lot, you know, in the grand scheme of things. But I think we're in that awkward period where good news is bad news in the sense that, you know, it was stronger than expected. You know, it was a solid employment report, which means the Fed might not pause in September. And I think that's what you're getting a reaction in the bond market.

stock market about. Oh, you think bond investors were anticipating a pause in September? Yeah, they strongly hinted at a pause. And then yesterday, you saw yields go up a lot. And that was because Brandiard, Fed Governor Brannier said it's going to be a hard case to make for a pause in September. So it doesn't mean 50 basis points in September, but maybe they dial back down at 25. But I think if you look at Fed Fund's futures, they were starting to price in a pause. Right. Okay. I want to go to the statistics. game very shortly, but one other thing I want to talk about before we get to the statistics game is I'm getting a little confused about the actual strength of the economy.

You know, we've been talking about the job market, the jobs data, says the economy is strong, right? If you create 400,000 jobs a month, when, you know, that typically it's 150, maybe 100, that's a strong job market. Unemployment is low, 3.6%. The employment to population ratio for working age. workers 80%. That's a strong economy. But then I look at the GDP numbers and I go, well, what the heck's going on? So GDP, that's the value of all the things that we produce, which was kind of

the headline number, what economists look at to gauge, well, how's the economy doing? Well, they talk about GDP. And then they talk about jobs. GDP declined in the first quarter of this year. It's quarterly data. And if you look at our tracking estimate, that you put together, Ryan, for the second quarter, that tracking estimate is based on all the monthly data that's coming in. And based on that, we make an estimate of what we think GDP will be in the current quarter, the second quarter.

It's now only 1.5%. Positive. 1.5. It's positive, but it's within spinning distance of negative. And it's not, correct me if I'm wrong, I'm going to stop in a second and ask your opinion right of all this. It's very possible we could get a negative GDP print in Q2,

which would mean. two quarters of consecutive negative GDP, which historically has been kind of sort of, it's not accurate, but kind of sort of the rule of thumb for a recession, right? So, Ryan, did I characterize the data yet? What the hell, what the heck is going on? And how concerned about that? How do you square all this? Is the economy strong or not? No, it's really strong. It's fine. It's the decline in GDP in the first quarter was a smaller inventory accumulation and a drag from net exports. And net exports were an enormous drag because we're buying a lot of stuff. A lot of that stuff is imported.

And that caused the trade deficit to really widen out a lot in the first quarter. Second quarter GDP, it came down. It was north of 2% earlier this week. But then we got vehicle sales and vehicle sales really softened in May. So that kind of deemed GDP a little bit. But again, when you look at the domestic economy, so if you strip out inventories and you strip out net exports, you know, growth is still pretty solid. Okay. So you're saying ignore the GDP number. That is correct. That is not representative of the health of the economy. Yeah. One thing I do every quarter when GDP comes out is look at, you know, the contributions to like the volatility in GDP and inventories and net exports are really climbing.

So they're kind of causing the data to be a little bit fuzzier than normal. Well, you could take kind of a darker perspective on that, right, on the inventory side. I mean, we had Gene Soroka, he was the executive director of the L.A. ports on. And he made the point that in the surrounding L.A. basin, there's more warehouse space than anywhere on the planet. And those warehouses are packed to the gills with stuff. inventories are very, very heavy. We're overlaid in with inventory, at least based on that.

And that would suggest that that would mean that producers, manufacturers are going to have to cut back at some point that, you know, they've done too much and we're going to cut back. And that's a negative for the economy. That's how you get, that's why you get declines in GDP, less output. You're not worried about that. Or you are worried about it. Okay.

I mean, if you go back several podcasts, you know, probably this time last we were talking about, you know, risks to the economy this year. And we all talked about inventories. Chris brought up the cobweather theorem that, and you heard on the podcast about, with the head of the port of LA, he mentioned that they, businesses overordered. They, you know, double, triple book. So I think inventories will be a drag, but I think the rest of the economy will start to

improve. I think trade can't subtract this much from GDP going forward because just like in the retail sales or the retail employment numbers, the mix of spending is shifting away from stuff to services, and that's going to help narrow the trade deficit. Yeah, he said inventory management has gone from just in time to just in case. So you hold excess inventory. But the inventory situation would suggest that the economy is actually, that argues for softness, you know, adds to the concern about the economy.

Okay. All right. I kind of wonder if that's going on a bit in the labor market, too. Yeah. Kind of employers panicking that they're not going to be able to find people and hiring and holding on to people and then having that cut back on hours because there isn't actually the work to support that labor. I mean, there's some evidence that that's happening in some segments of the economy. Right. Yeah.

And you can see it in the, it feels like you can see it in the record, or close to record number of unfilled job positions were still what, over 11, I think it was 11.4 million unfill positions pretty close to the record highs. That feels like businesses just, you know, if I'm worried about long run staffing my business, I'm going to keep those unfil, you know, even though I'm not hiring, I'm going to keep those positions open, you know, out there and continue the process of talking to people. There's nearly two unfilled positions per unemployed worker. Which I'm sure is a record high. Yeah, I mean, it's like double what it usually is. Okay, so going back to my questions, is the economy strong or economy weak? You're saying the economy's strong, but, but this inventory situation is a reason for some nervousness about what's going on. Yeah, I don't think, yeah, it's somewhere in between the two.

It's not as weak as the GDP numbers would suggest. It's probably not as strong as the labor market would suggest. So it's somewhere in between. I mean, Chris, what do you? He's buying it back a little bit. Yeah. Yeah, well, I'm pushing him a little bit.

So he's taking a little step back. I'm just, I'm just, I'm a little confused by it. That's, that's why I'm asking. Chris, what do you think about all this? Is the economy strong? Is it weak? I mean, depends on which part of the elephant you touch. What's going on?

How do you characterize it? I wouldn't say strong. I'd say the economy is in transition, which is what sounds like we've all agree on that we're moving away from goods to more services, unwinding some of the pandemic effects here on top of all the supply chain and energy and everything else that's going on. So for that reason,

you have all these forces going on. I think you can't characterize the economy as being particularly strong during this period. I don't know that it's collapsing or the GDP is representing the true picture. I think that's overstating the case. But I would say it's growing. The underlying growth is there, but certainly it's vulnerable to remember these forces during the transition.

Okay. You're on the National Bureau of Economic Research Business Cycle Dating Committee. This is the group of academic economists that decide whether you're in recession or not. And let's say it's now September, late September of this year, and you just got the number for Q2 GDP. It came in at negative 1.3%. on top of the, what was it down in Q1, minus one and a half? 1.5. 1.5. Recession?

No recession? How would you characterize? Labor market is still strong, three and a half, three six. Unemployment? Oh, yeah. Yeah. Job market is sailing along. Job market is doing what it's doing right now.

Yeah, exactly. Sorry. Yeah. And everything else is kind of hunky-dory as well. Well, industrial production. Well, I mean, it depends on, again, where you touch the elephant. And the housing market is it hunky dory? I'm not sure. I mean, you know, so... It's not collapsing. Your equity investor, is it hunky dory? I'm not sure. Okay, but you characterize

it the way you want to characterize it. But what do you think? I would say if it's, if it's weak, if GDP is negative solely because of the inventories and trade, but everything else is, looks relatively positive. I'm not going to call recession quite yet. Yeah. You can't. A recession is a broad-based decline in economic activity. Right. Broad-based persistent decline. Yeah. Okay.

Okay. Just saying. But I'm not even sure that's the right words, but those are my words. Marissa, well, if you're on the business cycle dating committee of the NBER, two quarters of negative GDP, what do you say? I'm with Chris. I think as long as other components of GDP, like what is consumption doing and investment and how's the job market doing?

Yeah, how are asset prices doing, particularly housing. We're all expecting some sort of correction or cooling off in the housing market, which is warranted given what we saw over the past few years. I think, yeah, I think the labor market and spending growth would count a lot more to me than just looking at inventories or trade. Yeah. Yeah, okay. I agree.

Yeah, no, I definitely I would agree with that. I mean, I don't think you can call a recession with job growth. I mean, he's creating jobs. How can that be a recession? I mean, you know, it doesn't make any sense. With low unemployment, you know, 3.5% or 3.6% unemployment. No, I don't. But it's an interesting situation.

How do you articulate that? That we could be in. Yeah. Yeah, that we certainly could be. in, certainly because we remember back for Q1, our tracking estimate was positive one and a half, and we got negative one and a half because you can't, the tracking estimates are pretty, very difficult to measure what's going on with inventory and trade because that data is lagged and not quite as good. So we, we were at one and a half positive. We got negative one and a half.

Same deal could happen here. You know, we can get a negative course. So we could have two quarters of negative growth. So we've got, well, you know, we're having economists and NBR are going to have some explaining to do, you know, exactly what it means. The other implications, is that productivity growth is getting crushed, right? Because productivity growth is output per hour work. So if you've got people being hired in more hours, but GDP is falling output, then productivity is taking it on the chin,

which is not good, but, you know, interesting. Okay, fair enough. Let's play the game, the statistics game, just to remind everyone, this game each of us put forward a statistic or two

the best and the rest of us try to figure that out using questioning and guesswork and deductive reasoning and the best

statistic is one where it's not so easy that slam dunk everyone gets it quickly not so hard that no one can get it at all and bonus

if it's related to the topic at hand which is the labor market or is something that's been released recently over the last week, maybe a couple weeks. I cheat a little bit every once in a while. You guys are pretty good at sticking to that role. I'm not quite as good. That's the game.

Did you just admit you cheat? I didn't say cheat. I said I don't as prescribe to the rules as closely as you. Yeah. Hey, by the way, shout out to some of our listeners who are really into this game, the whole cowbell thing. Tim Daly, our colleague, he gave us some cowbells, right?

Who's got him now? You did? I thought he did. Or maybe he's just taking credit for giving to him us and we didn't get him. I don't know. Where are these cowbells? Ben, you're going to have to have to think.

Is that from Tim? Yeah. Oh, can you go? Oh, there you go. Very cool. Oh, man. I look like, you know, the guy from, what's that?

show, the scary show. I can't remember the name of it. We're lurch. What's Lurch? Remember Lurch? The Adams family? Adams family. I look like, we look like we're from the Adams family.

Got it. Can you ring that again? Hold it. Can you ring that again? I thought, I thought it was a high quality. Okay, that's high quality. That's high quality. That's high quality.

That's high quality. High quality. Also, I was, I have a good friend Vijay. There's a call out the Vijay because Vijay is a avid listener of the podcast. He gave me a cowbell. I unfortunately don't have it here. Yeah, it's the highest quality cowbell.

The sound is beautiful. So like you, it's the kind of cowbell you hit you hear in the Swiss Alps. Yeah. Yeah. Yeah. Really nice. You know what I'm talking about, Marissa? Have you heard of Cal bells in Switzerland?

It's like, it's just. No, but I can imagine. Oh. It sounds like the Cal Bell industry. I have to tell you. It's Heidi-like. It's Heidi-like. Yeah.

Yeah, it's really nice. He also gave me a thumper, a T-shirt. Thumper, you know, the Thumper. Oh, wow. Yeah. I thought that was really nice of him to do that. So very, very nice. Good reminder.

Okay. But I need to get my, I need to get my cowbell from the Tim Daly Cal Bell because that looked pretty cool. All right. Who wants to go first? Actually, I'm going to pick. Let's go with Chris first. Chris, what's your statistic? All right, 13.1 million.

13.1 million. Is it related to the job market? No. Ooh. It is not related to the job market. It's not vehicle sales because vehicle sales were $13 million. That was $12.9 million, right? Or $12.8.

It is vehicle sales? It's total vehicle sales. 12.7 was light. a vehicle. Oh. Oh, that that's really tricky. Oh, so it is it is vehicle sales. He got it. He got it. All the way. Okay. So

light vehicle sales were 12. I thought it was 12.8. But you're saying it was 12.7 million? 12.7. Okay. And then total vehicle sales, which includes heavy... Heavyier trucks. Heavy your trucks. That came in at what? 13.1.

That was weak. That was weak. Both were weak. Both were very weak. That's what hit. Again, going back is the economy strong or weak, which depends on which part of the element you're touching. That's a weak number, 13.1. It is. It is. The drop in truck and SUV sales was the largest since March of 2020. Okay. That's people hesitating.

That could be. That could be. Yeah. Well, that's the question. Is this a supply chain issue? Yeah. You can't just build enough, which had been the case. is it people now changing behavior?

I get more nervous. If you're telling me that's demand, you're saying gas prices are up because you're saying it hit the heavy vehicles that gas cozzlers more. That's an indication that this is about demand. Right. There was also, there was this nice write-up

from Michael Brisson on the, I'll give him a plug. He pulled out this interesting statistic that in terms of expectations, of purchasing a vehicle over the next year from the conference board. 56% of people plan to buy a new vehicle within the next six months. And that's less than what it was back in May of 2019. So it does seem like people are at least indicating that they are hesitant to buy.

That actually makes me a little nervous. I mean, because the month before, we were at almost 15 million, weren't we? In the month of April. Yeah, 15 million. 14.9. 14.9. And that dropped to 13.1. Yes.

And we're saying that's not supply chain issues or production. That's demand. That's a big deal. Yeah. We think that's the case. I mean, it was 13 at the end of last year, it dropped as well. But that was, I chalked that up more to the supply chain issues. Yeah.

Now it seems like demand is the. Okay. Does that make you any more nervous about the question about how the economy is doing? Well, what about light vehicles? What was the change there? The trajectory looked like. Oh, so similar, right? Light vehicles also went from 14 and a half last month to 12.7 million this month.

I was just wondering if people are substituting, you know, not buying an asset. Trading down or trading down the less gas goes long. Well, the drop in autos was smaller than the drop in light trucks and SUVs. So that would suggest that that's the case. Although production, I think, is also shifted more towards light trucks and SUV. So maybe the supply chain effects are larger there as well. So I don't know that we can read too much into that. But it does suggest certainly that people are sensitive to the price of gas.

Yeah. Pulling back one way or other. Ryan, how do you interpret that? Is that making you more nervous? A little bit more nervous, but I think consumers are just being rational. Yeah, I guess it shows you're responding to price effects. Yeah, which is what we need to happen, I guess,

to bring in inflation. My kids play a game when I fill up the car. They try to guess how much it's going to be. Now their guesses are over $100, $119 there today. Really? Ouch. You got to stop driving that big van you're driving. Are you still going with the premium?

Oh, yeah, that's it. He's buying premium. Why? Why? Premium. You have to. You have to do this one. I don't want to go down this road.

All right. Okay, very good. That was a good statistic. Oh, we didn't hear a Cal about. I mean, Ryan nailed that one. Yeah. I gave it. Oh, you did get it.

Oh, you did it? Okay. Oh, beautiful. Well done. Well done. Yeah. All right. Okay, Mercer, you're up.

Okay, 76.6%. Is that... This is job market related. It is. The payroll survey or the household survey? Household. Okay. 76.6.

That's a percent, right? Yeah. Out of growth rate. Female labor force participation? He said female labor force participation. Almost there. Prime age? Yes.

Oh, my God. Oh, way to go. Ryan. Excellent job. Ooh. So female labor force participation is 76 point work. Prime age women. Prime age.

25 to 54, 76.6%. That rose over the month. And it's risen quite a bit in the past few months. And now it's only three tens of a percentage point. away from where it was in February of 2020. And it's actually closer now to the pre-pandemic rate than men's is to their pre-pandemic rate, which we haven't seen in a while. So I thought it was interesting because also if you look at labor market flows,

you know, you can look at people moving into the various categories. There was a very large uptick in women coming from out of the labor force into unemployment. So entering the labor force and looking for jobs. And this is a group, right, that was disproportionately hurt during the pandemic. A lot of prime age women left the labor force because somebody had to stay at home with kids who were unable to go to school or daycare. And that still is usually women that have to do that. And this is represented, I think, a big chunk of labor support.

that's been out there and it's it's really coming back and to the point where you know we're going to be back to where we were pretty soon I think yeah good sign that's a good sign so yeah also are we seeing okay no go ahead go ahead are we seeing improvement in child care employment is that the is that driving this question I haven't looked at um that it stands to reason though right it would stand to reason yeah well we might maybe Ryan you can take a look and see what happened to employment at child care centers. I mean, that... Yeah, I can take a look.

Take a look. Yeah, I'm just curious, you know, what happened. I mean, and just around here in Chester County, there's long waits to get kids into daycares because they can't find workers. Right. But maybe the CGNES, some of those constraints are abating in some parts of the country. Yeah, maybe. Allowing women to go back to work.

Yeah. Oh, that's very interesting. So you're saying that the female... Prime Age participation rate has recovered more than the male participation, prime age. It's closer. Yeah, it's now closer to its three pandemic rate than the men's is to theirs by a little bit. Okay. Yeah.

Okay. Interesting. Okay, that was a good statistic. And Ryan's on a roll. Now I'm getting a little nervous. Oh, fortunately, he's got to give us the statistic now. What's your statistic, Ryan? $455,000.

And this is down from $586,000. But this is a good sign. This is from the household survey as well? No comment. No comment. No comment. We'll give it away. You guys will jump on this in two seconds, if I say.

Is household employment? Oh, I know what it is, I think. It's the household employment growth rate put on the payroll survey measure. Definition. No? Is it marginally attached? It is not. It's labor supply related. Labor supply? No, not want a job.

Oh, is it the number of people who weren't working because of the pandemic that are, that are still out because of the pandemic? Yeah, I'll give it to. That was good. So it's the number of people. I botched that. You know what I'm saying, though. Yeah, it's a number of people, 455,000 people were not in the labor force because they were prevented from looking for work

because of the pandemic. So this gets back to the idea that, you know, labor supply is really critical to future job growth. And this is declining, which is a good sign that more people are able to go out and look for work because the pandemic's kind of fading. So does that deserve a cowbell? Just saying, no one...

Yeah, Chris has got the cowball going. Okay. Well, okay. All right. So, okay, I got, I'm very happy to get that because I'm still trailing in Ryan, but I feel good about that one. So, but there's still 455,000 people out there that are not in the labor force because of the pandemic. That could presumably come back in. Yeah, they're prevented from looking for work because of the pandemic.

So that should continue to fall. Yeah. that, you know, our labor or employment forecast is really sensitive to changes in labor force. So yeah, as long as we get more as a blog, we should go ahead. What do you think that actually means? Yeah. Why aren't they? They're prevented from looking for work because of the pandemic.

Because these are people not in the labor force. So that means they haven't looked for a job in the past month and they wouldn't or couldn't take one. Maybe they're still sick. Maybe they're sick. Does it mean they're sick? Does it mean they're taking care of sick people? Yeah. I even looked at the, you know, the pulse survey from census recently.

Have you guys? I don't even sure they've released one recently, a survey. We should take a look because that gives it more insight into why people aren't in the labor force. Survey fatigue. Yeah, survey fatigue. That's another good example. Yeah. Survey fatigue, taking it and looking at them. Looking at it.

Look at it. Survey fatigue and looking at them. It's not good for our jobs. No, no, no. We can't get tired of that. Interesting. Okay. Oh, that's very good.

That was a good one. Okay, I'll give you mine. You ready? Yep. $598.50. Lumber. Oh, very good. Oh, Chris, a good job.

That was like Wallace Wallace. Yeah. Well, actually, I guess that was too easy. That was a good one. That was a good one. It's come down a lot. Yeah, I think that's really a big deal, right? Because just for context, at the worst of the lumber shortages back a year ago, it's hard to believe it was a year ago. A lumber was going for over $1,600 per square foot. So we're down to 600. and prior to the pandemic, just before the pandemic hit it, was $450. So we're not quite back to pre-pandemic, but we're pretty darn close, right?

That's falling fast, right? And falling really fast. And inventories are apparently very high. We've got a lot of inventory of lumber now. So it does feel like that, and this is how it's supposed to work, right? The Federal Reserve has raised interest rates and trying to slow the economy's growth rate. It works primarily through financial conditions and the most rate sensitive sectors of the economy, housing. And housing is definitively slowing.

And that's now being reflected in lumber prices. So that's kind of a good bellwether for kind of what's going on in the housing market. And that's not just, that's not the only new construction. That's probably more importantly, you know, repair and remodeling and renovation. going back to those building material supply retailers that are laying off at this point. So it does feel like things are happening the way at least so far, at least the way they should. We're starting to see some slowing there. And it's having an impact on commodity prices, lumber prices, and that's the first kind of leading edge of more broader moderation and inflation.

It was, remember, it was a commodity prices that kind of led the way. and then we saw inflation pick up more broadly, and now we're starting to see the opposite of the current. The exception being oil, obviously related to the Russian invasion, and the European Union's decision to sanction the Russian oil that caused oil prices rise. But it feels like commodity prices are starting to come in, and that's a really good sign. The rise in construction workers that we saw in the employment assessment today,

do you think that's just a temporary? I took that as a good sign, too. do. Like more supply, you know, I mean. Okay. They're finally able to hire people. Yeah. They're finally able. I mean, talk about unfilled positions. They couldn't find people. And they had all these properties, these homes in the pipeline for completion or not even started. And it couldn't because they had, you know, building material supply issues, but also labor market issues. So my instinct was that that's a good thing, you know, more supply. And that'll help support, you know,

getting those homes built and, you know, taking some of the pressure off of broader inflation. But, yeah. Anything else you want to say about the housing market, Chris, while we were on the topic, you know, because that is clearly on the front lines here with regard to the slowdown. Again, talking about which part of the elephant you're touching. This is a part of the economy that is clearly weakening. Do you want to give us any more color there? Well, we got a couple other indicators this week from Kay Schiller, in terms of home prices,

both from K Schiller, 20 City Composite and FHFA. The Kishler continues to accelerate, I think it was 20.2% year-over-year, if I recall. Yeah. So you even faster than the prior quarter, and then FHFA decelerated a bit, but still, I think, right around 19% year-over-year. So still very, very high. I see that as just lagging. We're just, you know, we're looking in the rear view mirror here. Other indications suggest that things are slowing down in terms of listings and activity.

So I still expect to see some deceleration, but on the other hand, there's still a lot of, there's still lots of demand out there. So stick by the forecast that we have in terms of slowing but not collapsing prices in the housing market. Yeah, you know, I was on a panel for Fiazzi, which is like one of these research trade groups for bond investors, and this is a panel on housing. Ed, Lori Goodman on from Urban Institute and Ed Pinto from AEI, really good housing economists.

And Ed does something interesting. He looks at transactions from Optimal Blue. Optimal Blue is this platform that collects data on housing transactions. And based on that, you can see, oh, excuse me, on mortgages. And you can see, you know, what prices, what the homes are. transacting for with a little bit of lead because it reports on Optimal Blue and then the closing occurs a couple three months later. So he's looking at, he can tell us what, based on the properties that are on Optimal Blue, what price growth looks like in July of this year. And it's year over

year 14.7%. So that sounds really high and it is. But that that's rolling over though. That's definitely rolling over. So sequentially, it suggests maybe flat pricing, maybe even down pricing, you know, some markets. And I think we're starting to see that in some of the transaction data we're looking at too, right? Yes. Yes, we are. So it's a very similar pattern to that. That FHFA. Yeah. Okay. All right. A couple of other topics I want to address before we call it a podcast. Do you want child care employment? Oh yeah. What was that? Yeah. It was up a little bit more than a in May to 937,000. Pre-pandemic, it was a little bit north of a million.

So gap is closing, but very slowly. Slowly. Interesting. Okay. It's another factor I'm hearing, though, is that there were a lot of restrictions during COVID in terms of the number of child care providers you could have. And those may be relaxed. So you might be getting some relief in terms of the supply of child care spots.

I don't understand. What's that? So there's some rules in terms of how many child care workers you need for or how many children can be supervised by a child care worker. Oh, I see. It was really restricted during the pandemic. There were lots of restrictions in terms of how many you could have and could one child care worker substitute for another shift. They were worried about transmission and all that. But so now it looks as though some of those restrictions are being relaxed.

So you might be able to see more spots opening up in child care centers, even if the employment doesn't accelerate appreciably. Got it. Got it. Okay. All right. Here's something else that's been bothering me. I don't know if you've noticed, but in the last few days weeks, I hear more CEOs, big name CEOs coming out and saying, you know, you saw Jamie Diamond, who's the CEO of. J.P. Morgan Chase, the largest financial institution in the U.S. come out and talk about hurricanes

dead ahead. I'm paraphrasing, obviously, but it was pretty dark. Economic hurricanes. Sorry. Yeah. Economic hurricanes, meaning recession, dead ahead. And then you saw Elon Musk, who just said, you know, he's very nervous about the economy and he's going to potential layoffs at Tesla and hiring freezes and that kind of thing. And I just, And of course, going back to surveys, all the consumer sentiment surveys, not all of them, but, you know, like the University of Michigan survey, very, very weak. Business surveys very weak. The small business survey from the National Federation of Independent Business very weak, you know, people are very, very pessimistic. Can we, can we cause a recession just because we lose faith that, you know, we, we, we, we, we, talk ourselves into recession? Is that a possibility? What do you think? Mercia, do you give a view on that? Yeah, I do. I do think that. I think ultimately a recession, as you said, is a crisis of confidence. And if people think we're in a recession or we're

imminently headed into a recession, then people will batten down the hatches and stop spending. start saving, put off large purchases, become really circumspect and everything that they're doing. And I think that, you know, that stifling of demand is what ultimately causes a recession. Whether that's manufactured by the Fed or it's exacerbated by what the Fed's doing, if people think, you know, well, I'm not going to buy a car because car prices are up 50% compared to what they were prior to the pandemic. And I'm not going to take out a loan. and take on another expense and increase my debt burden if there's a possibility that six months a year from now, I might lose my job or someone in my household might lose my job.

Yeah, I think it could. I think it could. I mean, I think there has to be something fundamental, though, that is also happening in the economy, something real. But I think if enough people are yelling fire, people are going to start running. Yeah. What do you think, Ryan? Is it in the current context, in the current environment,

give me everything else going on, do you sense that if we can talk ourselves into this? I agree with everything Marisa said. You did. Okay. I think we can definitely talk ourselves into a recession. And I think that's one reason why when the yield curve and reverse, you hear everyone saying, oh, here comes a recessions because. Oh, yeah, you've been taking that long time.

Yeah. And that you just talk yourself into an economic downturn. Yeah. Chris? Yeah, I'd agree. And certain points in the business cycle, I think there is that vulnerable. I think it's hard to say you could talk from a very rip-roaring type of economy and suddenly move the entire economy into recession. To Marissa's point, I think there has to be something else out there.

But we do have plenty of fissures here, potential cracks in the pavement that could be exacerbated by confidence. and psychology here. So, yeah, I think we're vulnerable. There might be another take on it, and that is this is exactly what you'd want to see. You want CEOs saying this. I mean, at this point, right? Because you want the economy's growth rate to slow. You want less job growth.

You want the – because otherwise we're going to blow past full employment and inflation is going to become more endemic. So we need business people to hire less, right? And, you know, layoffs are incredibly low. You saw the initial claims for unemployment insurance, 200K. Yeah. That is, that's not consistent, I don't think, with stable unemployment, right? You need something closer.

Chris, your benchmark has always been 250, I believe, right? Yeah. So we need to see, so we need to see slowing. And that means that you would expect some CEOs to say, hey, I'm nervous. I got to be more cautious, right? So the fact that Jamie Diamond and Elon Musk and a few others are out there talking about this, maybe that's exactly what needs to happen to get to where we need to go. No?

The risk is that it's hyperbole, right? That they, it's one thing to say I'm worried about slowing to your point. And therefore we're going to take some stuff. We're not going to be as aggressive in our investment plans or whatever, but it then to, I don't know, hurricane and some of the other language. which seems as though it's imminent that it's, you know, there's nothing we can do.

It's coming. Well, that's the other weird thing. I mean, when you talk like that, it's like recession is like next month, you know, this summer,

maybe the fall. But very few times, even the ones calling for a recession would say that, right? Right. They're saying next year. Next year.

Next year. Like, like Ryan, you're saying next year. Mm-hmm. Right? So that, yeah.

So, okay. Yeah, I mean, I, at the end of the day, a recession is a loss of faith. So, you know, people run for the bunker. The other point, though, is no one's running for the bunker yet, right? Because take the, take the good benchmark of running for the bunker is the saving rate, the personal saving rate, right?

If you're running for the bunker, that means you stop spending. Saving goes up, right? But right now we're seeing saving rates go down, right? So that's not consistent at all with the idea. Yeah, consumers are, they're upset, they're nervous, they're pessimistic. They don't like the inflation, not, you know, understandably so. But it's not like they're acting based on that. They're acting just the opposite, right?

Vehicle sales is the exception, I guess. But, you know, we saw, you know, personal saving rates decline. Other sector, other discretionary spending is up, right, travel. Yeah, exactly. So there's all very strong. It's not like people are not spending. Right. Right.

All right. Okay. All right. In terms of this idea that we can talk ourselves into it and sentiment, is there, you know, the one measure I look at to gauge that, the one I find the best and most useful is the conference board survey of consumer confidence because that's more labor market oriented and that goes to the job market. I think that's, you know, more dollars and cents in what people ultimately do in terms of their spending and saving behavior.

Do you guys have a favorite statistic or is there other statistics you like? act to gauge this sentiment, you know, whether we are losing faith, anything in particular? You may not. I'm just asking if there's anything else you look at. I look at the conference board. You do look at the, but I think it's important to mention that the relationship and the causal relationship between confidence and spending is very loose in the short run. So consumers can be, you know, down in the dumps, but they're going to keep spending like

we've seen over the last few months. So it doesn't mean when confidence drops it. you're automatically going to see spending just tank. Because the Michigan survey, that's gasoline prices. That's the stock market. So that one, I'm not surprised, is falling very quickly. Right. Right.

Okay. Chris, Marissa, any measures you look at? I've actually come to rely less and less on the sentiment measures. On the sentiment survey. I guess we've been talking survey. Survey. I think that's definitely. I've mentioned the political differences as well.

that just makes me believe that those surveys aren't really capturing underlying sentiment, perhaps, of consumer. A lot of their factors that people are using when they answer there. So I tend to rely much more on the harder data, right? Whether it's market movements or spending itself, right? That ultimately is the true test of confidence. All right. I'll give you an unusual one. Okay.

I look at Google Trends for concession. So if people are searching Google for, you know, what is a recession or recession, then they're really thinking about it and it's on their mind and it's likely affecting their behavior. So I look at a lot of Google Trends search data. And what does that look like right now? It's gone up. Yeah, but I mean, it's not surprised. I mean, it's not to the point where you'd be like, oh, you know, there's a problem

because, you know, now you can't read a news article or turn on the TV without, you know, someone mentioning Jamie Diamond, for example, saying recession. So there could be some group thing coming in. I've got another one for you. It's not exactly sentiment, but kind of sort of is. It's how much people sell their plasma for money. You know, you can go donate plasma or you can sell plasma. And you've got companies that buy the plasma.

In fact, don't ask me how I know all this stuff, but I, from a reliable. I know it too. Apparently, the U.S. is the largest source of plasma in the world. About 75% of all plasma comes from the United States because in the emerging world, they're very nervous about allowing people to sell plasma for, you know, I think obvious reasons. So we are the predominant source. And in good times, people don't sell their plasma as much. but in difficult times they do.

And that's picked up quite a bit since the beginning of the year. A lot more people selling plasma, which is an indicator that maybe things are, you know, starting to go off the rails here a little bit. So it makes me just another reason to be a little nervous. It's your green span. Yeah, men's underwear. Men's underwear indicator.

Yeah, exactly. Okay, I want to do a couple more, two more things before we call it a podcast. First is, And we can speed this up a little bit. First is I want each of you to give me one indicator that you're looking at that is really most upbeat and most downbeat, things that, you know, because there's so many cross currents going on. You know, what is, what indicator is really saying, hey, things look really good and what indicator is saying, hey, things really look bad? And then then we're going to end by each of us giving our recession odds for the next 12 months and the next 24 months.

And each of these podcasts we do going forward, I want to do this for each of them going forward and see how that changes over time. So let the listener know, you know, how we're thinking, bottom line, you know, how is our thinking changing around recession risks? Does that sound reasonable? Okay. All right. Chris, can I begin with you? Do you want to give me an up indicator, down indicator, and your recession odds? Sure.

So up indicator we've been talking about all day. It's a job market. Job market? Jobs. Okay. Jobs, unemployment rate, employment population ratio, whatever you like. They're all saying very healthy situation here. There's plenty of negatives, but probably real income itself, just inflation adjusted incomes. Real wages, exactly. So that's nominal wage growth to 5% less the inflation rate of 8, so real wages are negative 3, something like that. Yeah, that's right. So that's certainly very negative. Negative. And then written my recession odds. I haven't changed all that much, but maybe a shade higher. I think it was at 55.

Now I'm closer to 60% within the next, by the end of 2023. I think that's, wait a second. So next 12 months is what your, what's your recession odds? Next 12 months. Yeah. Oh, I thought you were going through the end of 23. No, well, would be okay for you next 12 and next 24. I think that's just easier to get our minds around.

Okay. Next 12, probably closer to 40%. 40%. 40. 40. 40. 40. 4.0. Ben, are you writing this down? You got to write this down. 40. Okay, go ahead. Ben is our producer and he's listening in. Presumably he's listening in. Yeah. He actually is listening. He's a very good producer. Go ahead. Yes, I'm listening, Mark. I'm here. There you go. I was waiting for that. There is Ben. Behind the curtain. And I'll go 60% in 24. Okay, 40% recession odds in the next 12 months, 60% in the next 24 months. Yeah. Okay. All right, very good.

Mercia, you want to go next? You're up down all around. So, indicator that tells me things are really good is unemployment insurance claims. I mean, it had been like edging a little bit higher until this past week, but I mean, they're still incredibly low. And there's, it's a good. It's a good, leading indicator, right, for a weakening job market when you start to see layoffs pick up. So there's just no sign that, as you said, it's hard to talk about an imminent recession when you have an unemployment rate that's 3.6% moving lower and jobless claims that low. Right. Something that doesn't look good. I don't know. We already mentioned them.

I think vehicle sales, just because that is such a huge chunk of consumer spending, and it can remove the needle on overall GDP growth. And it's also, I think, is something that people plan for generally, right? So it does kind of give you some insight into consumers and what they're thinking, let's say several months a year out in terms of their own large-scale spending. Yeah. I mean, I'm not hugely convicted on that just because there are these supply chain issues that are kind of still messing with behavior.

So, I mean, I do think that that appears to be evading, but vehicle sales are pretty big in terms of consumer spending. So I'll say that. Okay, recession odds in the next year I'd put at, 33%. 33. Okay. Yeah. In the next two years, 50. 50%. Okay. Okay, very good. And Ryan, which are up and down and recession odds. One indicator that points up is it quits. So a lot of people are still quitting their job.

And normally, you don't quit your job if you're, you know, worried about your, your your employment situation in the near term. So I think that's an encouraging sign. Down, I would say, kind of similar to Chris's real disposable income. And real disposable income is what matters for consumer spending. That's dropping like a stone. And that's a lot of it's inflation really. But that's an issue.

Yeah. And your recession odds? All right. Next 12 months, I would say 45%. Next two years, 80%. Oh, you've gone home. gone up. Two years.

That's 24 months. A lot can go wrong. You're right. That's a long time. Yeah. The odds would be high regardless. I mean, yeah,

actually if it's, the next 12 months, I just don't see, that's, that's a short horizon. So I think it's hard to see a recession by June of next year.

Well, you said 40%. That's pretty high for the next 12 months, starting in the next month. Starting in the next 12 months. Yeah. Yeah. Well, Am I right?

I mean, given the lengths of business cycles, historically, the typical odds of a recession in a given year, on average would be close to 15%. Yeah. So two years out, you can kind of do the arithmetic. It's not, yeah, not even if it's typical, the recession odds would be pretty high. Okay.

All right. Okay, I'd say on the upside excess savings, we have a lot of excess. cash, two and a half trillion by our count, even with it peaked at 2.6, it came in because saving rates have come down and people are now having to shell out more of their excess cash to meet the higher gas prices, food, inflation. So it's down, but two and a half trillion, that's a lot of cash, right? I mean, that's over 10% of GDP. And yes, most of it is sitting with high income households, but it's pretty much across the board. So low income, middle income, high

income. So that makes me feel that feels like a pretty significant cushion, right, for a lot of bad stuff that could happen. Consumers keep on spending. So I'd keep an eye on that. We should continue to watch that very care. And by the way, we are going to get an estimate for Q1 of excess saving by income group in the next week or so. We'll get all the data we'll get all the data we need to do that. So that'll be very telling, you know, with what's going on with excess saving among low-income groups, because that would be the most vulnerable group here, obviously, given what's going on with inflation. I don't think they're, I don't think they have that buffer. I mean, they're borrowing aggressively now. By our estimate, they, well, through the fourth quarter

they did. They still had, you know, a lot of excess saving. Yeah, I think since then they've blown through. Yeah. Well, well, well, how could they? We went from, 26 to 25. Even if all of that came out of long-income households, they still have excess saving. Not as much, but they still do. Because you're saying you don't believe the data, our data, the way we constructed it is.

Maybe. Yeah, I don't know. It's not consistent with some of those other data points. You mean the increase in credit card? Credit card, personal loans. Yeah, but that's, I mean, can that be just transaction and gas? And gas.

It's just transactions, transaction demand. I'm traveling more. So I'm putting more on my card. That's at the higher end. Sure. I believe that, but not at the lower end. I think that's, they're going to credit because they can't. When I saw it, if you look at our data, because this goes to the Fed's data, which I thought

we figured out was bogus because of bad seasonals. If you look at our data based on credit files from Equifax, it's increasing, but not, didn't feel like it was like an untoward amount of borrowing. Did I have that wrong? Personal loan is growing very fast at the bottom. And well, there we have a bright by credit score. So it's not perfectly aligned. But the lowest credit score bands are increasing their balances very quickly.

Let's talk about that in next podcast. I'm more curious about that. Yeah, take a closer look at that. And on the downside, you know, gasoline prices. Holy cow, we're headed towards $5 a gallon now. You know, price of oil is at 1.17 per barrel. I think we're right on the edge of what's tolerable. If it goes much higher, you know, we get over five, consistently over $5 a gallon nationwide.

That means I was out in California. You know, what are you paying out there, Marissa? I don't know. Well, I just noticed it jumped 20 cents just in one day yesterday. So I paid 608 two days ago and now it's 630 or 630 as of yesterday. And gas prices play such an outsized role going back to can we talk ourselves under a recession. Yeah. I mean, that is really, at fact, I don't drive much at all now, but I did fill up my gas tank the other day.

I only needed half a gallon, half a tank, but I filled it up. The woman across the way was just going on and on about, you write, $100 to fill a gas tank. That was like, that resonates with people. That really makes them, I got to pay $100. to fill my gas tank. So I think that's a key indicator to watcher, you know, if that keeps moving up. Do you have a threshold of what gasoline prices would be to cause a recession? I think it's got to be at least five.

Probably if it's nationwide closing on six, that means that that's, yeah. Yeah, that's, that means that oil prices are probably closing on 150 a barrel. I think we're in that recession. At that point, I don't see any way out. So you can see why the president's going to Saudi Arabia, you know, get those guys to pump more oil because, you know, we need more oil to get. And the other thing is, interestingly enough, oil consumption is actually coming in. There's some demand destruction because of the higher price, people are traveling less. In fact, the, we consume about 20 million barrels here in the U.S. 20 million barrels a day of oil. It's come down about a million barrels almost from where it should be because of the higher oil prices. And that goes back to the vehicle sales that we were talking about earlier. So, you know, I think that's a really critical error. Okay, so recession odds, they have not changed for me.

One third probability over the next 12 months and close to even odds, not quite over the next 24. So that's about where I've been. I will end by saying, I am actually, I haven't changed my recession odds, but I am more optimistic today about recession prospects. than I was six, eight weeks ago. And the reason is that the Fed has been successful in nailing down inflation expectations. They're tough talk and their half-point move on interest rates. And what Lael Braynard said yesterday about no pause in September, that has worked. Inflation expectations, at least it measured in the bond market, which I think is the most

valid, important way of looking at it, have come in and they're consistent with what the Fed is saying. And that makes it much more likely that the Fed will actually succeed in bringing inflation down close to something that we're more comfortable with. So I, I, you know, we, we have the green arrows up there's risks to our risks. I think there are a lot of risk out there, but it feels a little less risky to me today than just the opposite of Ryan. Ryan, Ryan went up on his recession on. Okay, Ben copied those down. We're going to come back to this, if not every week, you know, every so often to, because I think it's a good way of gauging our collective thinking around how things are going here. Okay. With that, we're going to.

to call it a podcast. Just a couple reminders. One, at Mark Sandy. And, you know, obviously, Twitter handle. Please follow me. And Ryan, what's your Twitter handle? At Real Time underscore Econ. Okay, there you go. Mercer, do you have a Twitter handle? I think I asked that before. No. Yeah, but I don't tweet. Oh, yeah. You follow. You're following both of us religiously. I am. You are very good. And Dr. DeRides has his LinkedIn page. I know that's a happen in place. At least I've heard that. Please give us a rating. We need ratings on our podcast.

That really is helpful. Any ideas for future podcasts? Please, you can tweet them at us, tweet ideas. We have a survey. You can fill another survey on economy.com. Go to economy.com. If you're not completely fatigued out here. Oh, and I did want to mention we have a number of great guests coming on.

We have Sheila Bear. She was the former head of the FDIC during the financial crisis. And actually, just a sidebar, I think she did the single most important step during the crisis to bring an end to the crisis. So I'm not going to tell you what that is. You've got to come to the podcast to listen to what that is. We have Julia Carnado. Julia is a great macroeconomist. Formerly of the Fed has her own firm and is out there quite a bit.

And be good to have her on. And Anna Stansbury, she's an academic professor from MIT. Is that right, Chris? I think she's from MIT. And she has a lot to say about women in economics. And obviously the economics community has not been all that great about getting female participation. So I want to talk to her about what's going on there and what can be done about it. So with that, we're going to call it a podcast.

Thank you, everyone.