Odd Lots - What the Summer of Strikes Means For The Broader Economy

Episode Date: October 30, 2023

This special episode of Odd Lots was recorded live at the Bloomberg Screentime festival earlier this month in Los Angeles, where the summer strikes by Hollywood writers and actors were a hot topic among panelists and guests. During the event, we spoke with Omair Sharif, the founder and president of Inflation Insights, on how prolonged work stoppages in the film and television industry have impacted the economy, both in California and across the country, and what the recent rise in labor actions means for the US overall. You can also watch a video stream of this episode at YouTube.com/@Bloomberg_LiveSee omnystudio.com/listener for privacy information.

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Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, and wherever you get your podcasts. Hello, Oddlots listeners, producer Carmen here. This episode was recorded on October 12th at the Screen Time Conference in California

and before the UAW reached a tentative agreement with Ford to end their strike. Thanks for listening. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. You are going to be listening to a special episode of the Odd Lots podcast that we recorded live at the Bloomberg Screen Time conference in Los Angeles in early October. That's right.

Oddlots takes Hollywood. We are speaking to one of our favorites, Omer Sharif of Inflation Insights. And we are talking to him about the macro impact of some of the recent strikes we've seen this summer from the Screenwriters Guild, from the Actors Guild, as well as the United Auto Workers. Take a listen. Omer is one of our favorite economists that we speak to regularly on our podcast. where we typically cover like markets, finance, and economic stuff. That's right. And today we're going to try to join the two worlds of entertainment and Hollywood with more of the macro economic stuff that we do on a day-to-day basis.

Right. So obviously one of the big macro stories here is the ongoing strikes. We got the news last night. The actors are continuing the strikes, despite the fact that, you know, maybe it was expected to wrap up sooner. There's also more strike activity nationally. We also found out yesterday, Ford expanding its strike. So we're going to try to balance out the two stories, talk about what we've learned so far from the economic impact here locally in L.A. and Southern California and what that might say for the rest of the country. Yeah, let's do it. Omera, thank you so much for coming here and making the time and chatting with us. Yeah, nice to be back again. So let's just start with like a basic question, which is, you know,

the two strikes, one just wrapped up. Is it showing up yet in economic data? Yeah, so, I mean, we have some national reports we can look at that show some of the impact of at least the writer's strike. There's some data out there right now in terms of work stoppages. So any strike that's more than a thousand people gets recorded by the government. And some of that data started to show that about 11,500 writers were on strike beginning in the June number. So we have seen over the months. And we've now started to see that impact in the same work stoppages report, for example, showing 160,000 actors on strike. as well. And of course, it records a whole lot of other strikes as well. So that's probably the main

place where we see it. We haven't really seen it quite as much in terms of unemployment just yet. And there's a few reasons for that. I mean, you can imagine, especially with the actor strike, you know, actors also tend to work other jobs, right? There's very few full-time actors. And so if they're working other jobs and they're making money, they won't be counted as unemployed. And in fact, in one of the surveys, the household survey, depending on how you answer the question about whether you have a job, where you at your job, are you available to work?

There's sort of a list of questions you have to answer, and in order to be counted as unemployed, you sort of have to hit all three of these questions perfectly. So unless people answer it in a certain manner, they will not be counted as being unemployed. The one area also within the household survey where you do see the impact is, you know, the number of people who have a job,

but who are not at work due to a labor dispute. So that is a very, very specific category that they do capture in the BLS. And that is starting to show some of the impact right now. But more broadly, we haven't really seen a big increase, for example, in jobless claims. We haven't seen a huge move higher in the unemployment rate data itself, whether that's nationally or even really within L.A. or California. Wait, can I ask a very basic question? Maybe it's a stupid question.

But what does the literature tell us about whether strike action is inflationary or deflationary? Because I could see you, you could possibly argue it both ways. So if it impacts output, then maybe prices go up because supply of a given thing is in shortage. And of course, if it's successful, then presumably wages for some workers go up. But on the other hand, if things aren't getting done, if things aren't getting made, then you would assume that's a hit to economic activity. Maybe people aren't getting paid. So maybe it's deflationary in that way. Yeah, so one of the interesting things about the strike activity is it typically tends to follow inflationary periods. So it's not that the strike itself isn't causing prices to move higher. It's that there may have been shocks, like so, for example, the oil shock, now the last couple years with COVID, that caused prices to shoot up, workers fall behind, and then eventually that leads to more and more strike activity. So that's the first thing. I would say that it really tends to follow big price increases. The question of what?

than eventually the pay raises you get afterwards. You know, typically you don't see that as much in the inflation data. I think this time certainly could be different given, you know, we've got strikes on multiple fronts. And I think the auto sector is the most obvious answer. But that's partly because we're still recovering from a lot of the supply chain issues that, you know, you guys have talked about in the show many, many times. So when you think about autos, for example, you know, auto production is only just in the last

six, seven months, gotten back to where it used to be before COVID. So to get a hit now to production is potentially. someplace where you could see inflation pop up for new cars, for use cars, and other places. But typically, you don't see as much of that happen post the resolution of the strike. Right. Okay. Well, on this note, you know, I realize we are at an industry conference, so I won't ask you to opine on whether or not the writers and the actor strikes are justified. But walk us through what the actual data tells us about wages for this particular subsector of worker. I started digging into this, I was actually very surprised to find out some of these numbers.

And I think in part because when, you know, I remember hearing about the actor strike initially, and I just remember thinking, well, you know what, I think Tom Cruise is going to be fine about a few months of pay, right? But what you generally don't tend to think about is all the other thousands upon thousands of actors who are not, you know, the A-list celebrities who are in the magazines and so on. And so I started to look through the wage data. And I said, you know, how much do actors actually make? So for those of you who can see this chart, the top chart is just showing you a very specific industry. Right? So this is the motion picture and video industry.

This is where you'll find actors, but also everything from, you know, folks who work in lighting to editing and so on. So the actors are way down there. They're way down. They're way down. They're just below data entry and amusement park workers and so on. And they make about, you know, $16.70. And that's the median.

So half of them make more than that, half make less than that. But 1670 is where they fit in. Yeah, number one, you would not be surprised, you know, you're not going to be surprised is lawyers in the motion picture industry. But actors are way down. They're in the bottom 20% of all workers when it comes to wages in the motion picture and video industry. And, you know, another chart I wanted to look at was to say, okay, well, if this is the median, how much do people at the bottom end make versus the top end? And, you know, the second chart down there shows you actually the green bars of the U.S. as a whole, so all actors across the United States. and the red is specifically for the LA Long Beach, Anaheim area.

So that's a local look. And you can see locally, the median is actually only about $15.70 for the L.A. area. So below the 1670 we see, but the industry as a whole. But look at how little variation there is at the bottom end. Right? Like if you go towards the bottom 10%, you're still only at about $15.60. So only about a 10 cent difference between the bottom 10% and the middle. even at the 75th percentile, you only move up to about $16.70.

Only about a buck more per hour. Fast forward to the 90th percentile, now you're up into the 70s. And for the U.S. as a whole, you're up to over $110. bucks. So you really, you know, if you're an actor essentially, unless you're in that top 10 percent, and quite honestly, probably that top 1 percent, your median wage is probably going to be around that $15 to $16 range, whether that's a local number or whether it's national. as a whole. One of the reasons we love talking to Omer is the level of data that he becomes

equipped with the numbers. Tracy once wrote an amazing article about mayonnaise inflation. And Omer like do all the different like categories within. He's like, well, you might want to look at like the fats and oil section of the producer price index and then the PCE. It's, you know, mayonnaise is captured here. One of the things, and you mentioned it that many actors have other jobs. So even if they're striking, they're not necessarily going to be counted as unemployed. And looking at these wages, I imagine that these other jobs that they could pick up, service industry jobs pay pretty close. Like, they're probably not taking a big economic hit. Yeah, that's right. So, you know, here I wanted to take a look at some of these other areas where you would see, you know, again,

as I mentioned, very few actors are full-time actors, right? It's part-time. You're taking other jobs. And so I took a look at sort of some of, you know, just picked out randomly some of the, the areas where you see actors tend to work. And so you'll find places like, you know, occupations like, you know, bartenders, servers, real estate agents is a very popular one in L.A. at least. And so here you can see, this is local. These numbers are for local for L.A. County. And so, again, the actor is 1570 an hour. Servers are about $15.15 an hour, roughly. Bartenders, you know, a little bit above that, about 1535. substitute teachers, $23 an hour real estate agents around $31.

So, you know, that's why kind of the median is as low as it is, because some of the other occupations here are, you know, whether it's bartending or working at a restaurant, also tend to be on that, you know, lower end of the overall spectrum. So that's partly why you're seeing that number be so low. But again, I think when you look at that distribution, unless you are in that top 10%, the bottom 90 is, going to be about 15 to 16 bucks an hour, which tells you just, you know, how tough it is

to kind of make it in that industry because it's not like if you're in the middle, you're making 15, 20 bucks more than if you were at the bottom. And there's basically no difference. There's the bottom in the top. And most people are in the bottom. Yes. That's basically from your church. On April 4th, 2023, around two in the morning, a man was found stabbed multiple times on a sidewalk in

downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the killing of Bob Lee, beginning April 16. You knew I used to be a substitute teacher, right? Yes, I was aware of this. Were you also a struggling actor on the side?

Actually, kind of. But, no, just see, I give a shout out to the substitute teachers as a former self here. Yeah, okay. Fair enough. So one thing, actually, going to Joe's point about mayonnaise and all the different data sets that you can look up, one of the things I learned about inflation statistics doing that article was that there are these qualitative adjustments that the Bureau of Labor Statistics does on these numbers, where they will look at, probably not mayonnaise, but they'll look at something like a refrigerator and say, well, a modern refrigerator is so much better than a fridge from 19. 85. It can do so many more things. And so we have to adjust the inflation calculation. I always wondered, for something like movies or TV, can they do the same type of qualitative adjustment? How would you actually measure that? Yeah, to the best of my knowledge, they don't do

anything. Services in general tend to be very, very difficult to quality adjust. You know, some exceptions can be things like your cell phone service where, you know, your wireless plan. You get a certain amount of data through it. If that data increases or decreases, they can sort of measure what that would quote unquote cost. For movies, though, I think it's, as far as I know, they don't do anything with that. And in general services, activities are very tough to do. So they really try to stick with goods, as you mentioned, like, you know, televisions, refrigerators, cars. You know, the new model, your car comes out. It's got more bells and whistles than the last one. They can look at how much the manufacturer spent on adding, you know, better technology to that vehicle and sort of remove

that from the price to say, hey, this is the quality adjustment. Services, though, it's very difficult to do. Okay, so the BLS isn't watching all the new movies and going, wow, these special effects are so much better. We need to adjust our inflation method. You know, it's a good question. I will ask them when I get back to work tomorrow. This is the other thing we've learned, by the way, is that the BLS is great. You can call them up and just ask a question about the ECO. economic data and they'll walk you through it. They're happy to chat about it all the time. You mentioned, okay, so unemployment, not really showing up in the data. Are there any other sort of like statistics in the regional economy where you can see some effect from work stoppages or certain

types of sectors? I mean, I have to imagine, you know, obviously the not shooting affects more than actors, affects makeup people, affects other production people. Are there other areas or other data sets you can look at to see how the strike is happening? having an impact or percolating up there. Yeah, so actually, you know, if you look at industry employment numbers, right, so specifically here for California, and you can look at, for example, sort of the film and TV industry, and you can tack on also, there's another industry that captures independent writers and performers. So if you kind of combine those two big industries and say, what's going on in the job growth

in those two sectors in California, since April, so the strike started early May, a writer's strike at least since April combined they've lost about 17,000 jobs and most of that has been in you know the motion picture industry less so on the independent writer side but it is clear there that you're seeing some impact in terms of layoffs that are happening so that's one area but the second area also is that activity in general in the industry has been contracting probably for the last year and a half so you know I'm not going to you know you mentioned earlier about are the strikes justified or not. I don't know if I want to go down into that rabbit hole, but what I will say is that in general, I really like the way Ellen Stutzman, who is the chief negotiator for the Writers Guild,

you know, they're criticizing the writers of writers about striking at a time when things are tough for the streaming services and so on. And she said, look, our job is to ensure that our guild members have good jobs and share in, you know, the value that we create as writers, regardless of whatever it is that the industry is doing. And what the industry has been doing in terms of film and TV is, you mentioned shoot days earlier, so this is a good number to look at. From 2015 to 2019, before COVID hit, the average number of shoot days in California every quarter was about 9,500 shoot days. So this is every... Real quick question. Who tracks the shoot? So this is a film LA. Okay. You can, you know, Google them. You can find these numbers.

They're all available publicly. Okay. And so you, if you want to get a permit to shoot a commercial, a TV show, whatever, you go through film LA, so they can track who's shooting, how often, you know, how many days and all that. So typically, on average in a quarter, Prior to COVID, it was about 9,500 days. Obviously, COVID, nothing happened. It went to zero. But by the middle of 2021, we were back to about 10,000 days of shooting. Since the end of 2021.

So this is about the last five quarters before the strike began. Shoot days have fallen every single quarter. As of Q1 of this year, shoot days were 20% below the five-year average from 2015 to 2019. So, you know, even before the actor strike started in July. the writer strike started in May, activity had been sort of on a pretty steady downtrend for almost, you know, just over a year, really. So there you can see that, you know, things were already kind of difficult for the industry as a whole for the strikes began. And so that's one area we can see it clearly. You can see the employment numbers as well.

But interestingly, as we've talked about, because writers can work other jobs, you don't see it, for example, in the jobless claims data. You haven't seen such a big spike overall. You don't see the unemployment rate in California moving. So in April, it was 4.5%. Now it's 4.6%. The one thing I would caution is we only have data for California through the month of August. So it's only been about a month since, you know, the actor's strike started. So it might just be a matter of time before we start to see it over the next couple of months. But on the right, on the actor's side, it might just be a little too early to really say. This was going to be my next question. I'm getting the sense that there is a lag involved here, partly because people do

have more than one job or actors typically have more than one job. How do you kind of gauge how long that lag might take until you start seeing more of a stark impact on the numbers? So I don't know exactly what that lag would be, but I think if I wanted to try to track, you know, when is it starting to show up? I would be most closely watching the weekly data on unemployment claims, especially, you know, granular divicting down into L.A., what's happening in L.A. County, partly because the workforce here in that industry, is roughly, I think, about 3.5% of all jobs in L.A. are either in that industry or, you know, in that independent performers. So those two areas you want to watch, and if you start to see it

happening in L.A., you know, I think it'll be obvious with the jobless claims data when that starts to show up. It's tough to say because people can transition from acting into other areas as well in terms of those part-time jobs that we talked about. So you mentioned earlier that you have to answer three questions in order to be counted as unemployed? Do you know what those questions are out of curiosity? I knew this was going to come up. I should have memorized these. So one of them is, you know, do you currently have a job? The answer would have to be no. Are you available and looking for work? Would also have to be no. And the third one I'm blanking on right now, but I will get back to you on it. Okay. Two out of three is pretty good. I want to go back to a bigger picture

thing you said, which I think is really important, which is that historically strikes are not the catalyst for the inflationary period would come after them. And of course, that makes sense. People feel that they're, like, falling behind. People want to, like, get their share and there's this whole idea of, like, you know, inflation in general is often, like, a battle over a result of different competing claims on money. Can you talk a little bit about the big picture, like, historical trends of what we see? I know that, like, strike activity is picked up a little bit, but it's nothing like what it used to be. Talk to us a little bit more about that theory of labor, tension, strikes as a sort of post-inflation phenomenon.

Yeah, so obviously there's been a ton of attention on unions. Yeah. And strikes the last year or so. What's interesting is if you actually look at the percentage of workers in the private sector who are part of a union, in 2012, it was around 6.5%. It's actually down to 6% now, which is not something you would necessarily know. Wait, sorry, what was the 2012 number? These are people who are in a union.

Yeah. employees who are in a union in terms of all private sector employment. Okay. So out of everyone who's working in the private sector, only about 6.5% of people were a part of a union. Got it. 10 years ago. And now that that share has gone down to 6%.

So even though they're getting a lot more attention, that share of folks who are in the union has actually gone down, the number of people who are currently on strike is about 210,000 roughly. That's not even as high as it was several years back. It's nowhere near the several, you know, five, six, 700,000 in the 80s. We could potentially, by the way, get there. There's, you know, the possibility that these 75,000 healthcare workers, a Kaiser might strike. Obviously, the UAW is not completely striking. That's 140,000 people right now that, you know, I think only about 15, 20,000 them are on strike.

So we could potentially get to a number that's been the highest since the early 80s. But I think part of, you know, what's going on there is, one, I think given what's gone on through the pandemic, obviously there have been a lot of changes in the labor market in general, everything from work from home, but also during that period, a lot of workers, frontline workers especially, continue to work, and, you know, companies did extremely well in terms of profits. And so a lot of these folks are coming back now and saying, like, you know, we ought to be sharing in some of that record profit growth that we've seen over the last several years. And you can sort of see that in terms of opinions about unions, which used to be much more negative. they're enjoying some of the best support they've had in decades from the general public,

if you will. So that's one part of it. Also, I think the other element here is that when you think about some of the industries where we're seeing strike activity, they are undergoing, you know, transformational changes, right? When you think about writers and actors, yes, of course, it's about better pay and about, you know, residuals. But it's also about the use of AI. Right.

And people want to figure out how is that going to impact me? down the road. In the auto worker's strike, yes, about better pay and pensions and benefits. Also about EVs. You know, how are the change of electric vehicles going to impact workers? So a lot of these places are seeing transformational changes that are coming and, you know, workers are trying to figure out how exactly they can sort of protect themselves in that sort of environment. So yes, there's been a lot of activity. I think the profit story is big. I think obviously inflation is a huge, huge part of that story. For a couple of years, real wages were declining very, very sharply.

If you actually look at auto workers, for example, you go back to 2008, they took a lot of cuts to help the industry survive after 08. And if you look at their real wages since then, they're still down about 10%. So they're asking to sort of be made whole and then some at this point, given profits that we've seen at the auto workers.

Yeah, they also created that sort of tiered system for auto workers. Okay, so some common themes running through the Hollywood strikes and the auto workers' strikes, such as, you know, obviously inflation's been picking up, real wages going down, transformational change that is this big question mark for the respective industries as a whole. But how much of a read-through can we get from the actor and writer's strikes and the economic impact so far to the UAW? Because as you point out, it feels like the situation of someone who's making cars versus someone who's

writing scripts or is a part-time actor, it feels different. Yeah. So look, I think you can't even get a re-through from the writer's strike to the actor's strike, let alone to the UAW. I think what I was saying in general, the underlying theme has been so far this year and parts of last year, you've seen some unions, even if they didn't necessarily strike, win some really big concessions. So think about UPS and the teamsters.

They threatened to strike, ended up not striking, but they won some really big gains for their workers. The pilots didn't strike, but United, Delta ended up with 40% raises over the next four years. So you've seen these unions sort of rack up win after win after win, really big unions rack up these wins. The writers is one element where, you know, five months ago, people were wondering, what could they actually get out of this? And they got a fair bit of what they wanted out of it. But it's tough because now, you know, as you know from yesterday, the negotiations are off right now on the actor side of it. thing. So it's tough to get a real re-through, even within the same industry, but I would say so far,

I think union after union is inspiring the next union to take on the challenge because they have racked up a lot of ones this year. UAW is also a little bit different in the sense that the way they're striking is targeted. So it's a very different approach than what the writers did, different approach on what the actors are doing as well. So it's hard to say if we can really take what happened with the writers and the resolution on the writer's thread and say that there's something there to learn with respect to the UAW other than, hey, these guys also got to win. You know, we should keep, continue to kind of fight. So there's an audience question.

You know, you mentioned that even prior to the strike, that the number of shoot days in the area had been trending down. I think you said for five straight quarters, how significant just as like the health of the entertainment industry for California? Well, if you look at shoot days, it's not gone great. Right. You know, being down 20% versus what we were doing in, you know, five years prior to COVID is a pretty significant. And by the way, that does not include the second quarter, which is when the writer strike began. So after the writers. So then it's going to plunge. Yeah, it's going to plunge. And we don't even have the data yet for after the after the after the after strike, right? That's going to essentially plummet. But even by the second quarter after the writer's strike began in May. So you only really had one month, April, where you probably were shooting. We were down to about 6, 500 days, which is the lowest since prior to 2015. So you're, you know, you're seeing in general a year and a half of an industry that's been struggling. And I know, you know, throughout the day, people have talked about streaming and how the challenge is there. So, you know, I would say that the industry has been, especially when you think about shoot days also. They've been losing shoot days, especially in commercials.

Think about commercials for anything from like shooting a, you know, a car commercial or so on. They're losing business to places like Georgia. You know, Georgia's got something like about a billion dollars. and tax credit that they gave out last year. Wow. And so that's, you know, they're losing commercials to other parts of the country. Shows are also being shot elsewhere. So there's been a steady sort of, I don't know if I don't want to say exodus,

but some, you know, folks who are- Erosion. Yeah, erosion is a better way to put it. So, you know, there's definitely a struggle going on right now, I think, more broadly speaking, for the industry. You know, you mentioned this idea of maybe some of the hot union, summer that we've seen is being caused by people looking at the wins from other labor organizations and thinking like, well, you know, maybe now is our chance. And of course, you also mentioned that

a lot of strike activity tends to follow on after periods of high inflation for obvious reasons. What would be the catalyst for some of these wage pressures to die down, I guess? Like, if we started to see a lot of pushback, if inflation started to come down and maybe real wage. is stabilized, would you expect to see some of this activity go away? Or what does history tell us about the end of these surges in strike activity? Yeah, so I don't know that inflation coming down would necessarily solve the problem, partly because a lot of these contracts, for example, tend to be three, four years long. And so what you're negotiating for now is to try to get back what you've lost over the last

three years. So inflation comes down from 9% last year to 3% this year. That's great for hopefully locking in a win now over the next course of the next several years. But you're still trying to play a catch-up to the last year. So I don't know that that would necessarily do it. I think, you know, the two things typically tend to be one, if it's an industry where public opinion will turn against you very quickly. So I could see a situation, for example, if the auto stuff drags on for a long time, the inevitable thing that's going to happen is car prices will skyrocket, much more so than they have even in the last. year or two years. And that's going to cause, I would suspect, you know, that's going to cause

problems and tensions with the broader public, right? So I think that's one potential data. This is, in other words, as you said earlier, we're in an era where surveys show that unions enjoy relatively high support versus, say, several years ago. And if car prices start to spike, that could start to shift. You know, it's all well and good when the enemies like corporate greed. Yes. Right. When it starts to hit you at home, that becomes. a different story and people tend to change their tune pretty quickly. So that's one potential danger there is if sort of the public turns against you. But the other issue also would be, you know, to some extent there's a certain, as you know, all these unions have a certain amount

of money where they help to provide for people who are striking. So the UAW, for example, is giving out, you know, $500 a week. At some point, you know, to the extent those funds run dry and it really starts to become very painful for the workers at some point, that's another sort of element that could, you know, lead to a quicker resolution, if you will. This seems like a distinct difference between the Hollywood strikes and the writer strikes, where I can't imagine the auto workers are just like picking up shifts at restaurants and bars at the same wages. They are the same way actors often can.

Yeah, I think it's a very different dynamic. So another reason it's hard to get read through between them. Yeah, actors, like I said, it just hasn't shown up in the claims data because they're able to shift into these other sectors. You know, there's a question, and I don't know. I wish I even knew this. Someone is asking other areas within entertainment that could strike. Do you know, like, are there other risks of further contagion? Like, I'm not, I wish I had a better understanding of whether there are, like, other Union-Gild contracts.

up, but is there still risk of contagion within the local economy? So prior to all of this, there was a resolve because it never went on strike, but there was a Directors Guild issue, but that was resolved. The one that I have read about more recently is voice actors.

Oh. So voice actors, I mean, they are part of Zagastor, so they can't work, for example, on a full-length animation feature, but they can still work on voice servers for commercials. and things like that.

But there was some talk about, you know, some others who are not covered under these contracts to potentially also strike. Something similar in terms of, like, the video game industry as well. So there's some elements there, you know, some spillover. But I don't think those areas are quite as large as what we're talking about with respect to the actors part of it. I'm June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets.

From corporate law to constitutional law and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with top attorneys, judges, scholars, and policy experts to break down what the rulings really mean. We do this every weekday, then bring you the best conversations in our state. daily podcast. Search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else you listen. On the East Coast, listen as you start your day. And on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcast. This is slightly off topic, perhaps, but not really. So the other event that happened last night, obviously the second tier event,

compared to the opening evening of Bloomberg screen time was Taylor Swift and her red carpet premiere for the Ares Tour. And there's been so much discussion recently about this idea that Taylor Swift is propping up the U.S. economy, injecting billions of dollars worth of demand at a time when we might otherwise see some softening. What do you think about the swift effect? The new dealer rule. Yeah. I mean, I think it's pretty real.

when you look at the data. If you look, for example, where she has gone on tour at certain points, you will see a spike in hotel rates everywhere she goes. So a good example of this is a couple of months ago, we saw data in, she was, I think, touring the Midwest, and it was like June or July. And prices prior to that shot off 55% for hotel rates. As soon as she left the next month, they were down 20%. Wow. So, you know, there's pretty clear that there's an impact happening. People are traveling from all over for the shows. And Beyonce also, you know, right? There's actually, I think, you know, Anna Wong at Bloomberg has actually written a lot about this. And I think there's a lot of good interesting data she's put out about it. But yeah, I think it's, it's

very real. Even the Philadelphia Fed, I believe at one point said she impacted the local economy in the Beche book. Right. So yeah, I think it's pretty clear there's a Taylor effect happening. Is it at the level where you, as an inflation analyst, have to pay attention to Taylor Swift tour date? I never thought I would have to. But yes, like I said, this hotel rate stuff was shocking because this is one of those things within the inflation index that is extremely volatile. So month to month, it can destroy your forecast and it destroyed mine this morning. But it can move around 5%, 7% in a month. And like I said, you know, last month it was down massively.

And I couldn't figure out why. And I started digging into the weeds. And next thing I know, I see this massive decline in the Midwest. And sure enough, the few months prior to that when she was. touring around the region, you had just seen this huge surge, and as soon as she was gone, so you saw hotel rates come down. So there's some element of, you know, her impact on different datasets, including the inflation index for hotel rates, that I think is pretty obvious. And again, I never thought I would have to worry about this kind of stuff, but it's, it's in the data. So,

you know, you've got to kind of be aware of it. Well, as you mentioned, so we are, what is today, October 12th, I think, regardless, it's a, is CPI Day, which is like a holiday for you. And so we really appreciate you spending your CPI day with us talking about the entertainment industry. But since we have you on CPI day, and the numbers came in a little bit hot, but like what's you, at least on the headline, others were saying, oh, if you look at like core services, X housing was actually kind of cool. What should we take from the inflation trajectory right now? We've had the summer of disinflation, right? We had four or five months where the numbers were retreating and they would look like they used to look private. to COVID and things were improving to the point where Fed officials were saying, hey, maybe we don't

need to raise rates as much anymore. The last two months, we've had this a little bit of a pop here to slightly higher numbers. You know, we're not going back to those 2021 type days or early 2022 when every month we were getting numbers that were running, you know, six, seven percent annualized. But right now we're around three and a half percent annualized, which is still too high for the Fed. The problem is over the next quarter, three and a half is about where we're going to be sitting, I think. And so, you know, the problem is going to be that you're hoping to get down to 2% on inflation. What looked like a trajectory that was going to get you there over the summer has now shifted higher. And I think we also have to be a little bit careful here because CPI is absolutely going to shift higher over the next month or two.

The core PCE deflator is obviously what the Fed prefers to watch. that looks like it will shift a little bit higher, but probably not as much as what's going to happen in the CPI for some, you know, reasons in terms of how they're constructed differently. So we're going to have to watch that one more closely. But the problem for the Fed, I think, is when they meet in December, they're going to walk into that meeting. A lot of people think we don't need to raise rates anymore. They've, we're done. What they're going to confront is a August, September, very likely October and November CPI that are all running at about a three and a half percent annualized rate. And, you know, you mentioned the super core, which is core services outside of housing. So these are, you know, a lot of different things, hotel rates, airfares, what you pay to go to the movies, you know, what you might pay to go to a sporting event. Those sorts of prices were up today at a 7% annual last rate. And the concern, I think, is in December it's going to be suddenly this path has shifted higher. So do they think that they need to do what, you know, maybe do one more rate hike, which, by the way, 12 out of 19 of them thought was the right. move in September. It's going to be tough for them to, I think, you know, if you're data dependent

and the data has shifted higher, it's going to be tough to sort of forego another hike in December. So I think that's the concern for me is, you know, are they going to be able to sort of parse through this and say, hey, we should go one more time or are they going to look at it and say, we know some of these things will cool off next year so we can kind of hold our fire right now. Maybe they need to ask Taylor Swift if she's going to extend her to her or not. See, I always thought that Taylor Swift tour would be deflationary because it's all these sort of like, you know, people with like, you know, middle class family is transferring money to someone who is more money than God, who is not going to spend it.

She's not spending at all. Transfer of money to someone with a much lower marginal propensity to consume. But, uh, I get, but apparently in the short term. They are spending it on airfare to get to the show, to the cab. Right. Everything except the ticket purchase, I guess, would be in. Yeah. I'll say one of the things about the strike, too, by the way, there's going to be a lot of

numbers that come out, you know, a recent one from the Milken Institute said the economy is going take a $5 billion hit from the actors and the writer's strike. They also said there was a $2 billion hit in 0708. The thing, though, is for a lot of people, it's like, let's say the movies don't come out and new shows are not coming out. If you're somebody, you know, you live in wherever in L.A., in Manhattan, Brooklyn, and you go to the movies often, and these movies are delayed now. That money can get spent elsewhere, right? Like, we know that from COVID, right? When people couldn't, people were stuck at home, they couldn't go out to the restaurants or the bars. What do they do? They just bought every sofa and, you know, lamp they could buy.

Remodeled. And they continue to do that for like two years. So it's not, you know, if you're living in New York and you can't go see a movie because there's new movies out, you know, you go check out a new band at the Mercury Lounge. There's a lot of other things to do. So that money can get spent elsewhere and kind of limit the impact of the strike. And in fact, if you look at, you know, sort of some of the lost wages we've seen so far, for actors, for writers, it's a problem for the L.A. region.

You're talking about potentially as much as a 2% hit to GDP, I think, from, for annualized for L.A. if this goes on for the rest of the year. But when you broaden out to California, this is a $3.5.3.7 trillion economy, right? Now you're talking about a couple of, maybe a tenth. You go out to the U.S. It's a $24 trillion, $25 trillion economy. It's virtually close to zero. But like I said, you know, even though people may not be able to spend as much on the movies and sort of associated things, that spending we know can shift elsewhere and kind of limit that damage to some extent. I feel like I need to spell out for all thoughts listeners. that go see a new band at the Mercury Lounge was, in fact, a reference to Joe's band and their first show at the Mercury Lounge in December.

And in terms of inflation, I just want to add, Joe is making me buy my own tickets. I don't even get comp the 20 bucks for those. No, I have to buy them. We're trying to do our part for the lag. If you're in New York City, December 19, come out to see White Sweet Crude at the Mercury Lounge. Omer Sheree, thank you so much for doing this. That was our conversation recorded live. live at the Bloomberg Screen Time Conference in L.A. with Omer Sharif.

I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthal. You can follow me at the stalwart. Follow Omer at F-Cast of the month. Follow our producers, Carmen Rodriguez at Carmen Armin and Dashel Bennett at Dashpot. And thank you to our producer, Moses Ondam. For more Oddlots content, go to Bloomberg.com slash Oddlots, where we have a blog, we have transcripts, and a newsletter. and you can chat with fellow listeners 24-7 in our Discord.

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