On with Kara Swisher - The Economy Looks Fine. Why Doesn’t It Feel Fine?

Episode Date: July 30, 2026

Americans feel pessimistic about the economy even as the stock market soars and unemployment remains low. Kara speaks with a panel of economic experts to explain the disconnect. She’s joined by Atlantic staff writer Annie Lowrey, Catherine Rampell of MS NOW and The Bulwark and economist Claudia Sahm. They examine the impact of President Trump’s latest round of tariffs, the economic fallout from the Iran war and the hidden weaknesses in the current labor market.  Plus: How vulnerable is the broader economy to an AI bubble? And what happens when economic growth increasingly benefits investors rather than workers? Questions? Comments? Email us at [e-mail] or find us on YouTube, Instagram, TikTok, Threads, and Bluesky @onwithkaraswisher. Learn more about your ad choices. Visit podcastchoices.com/adchoices

I really think of, you know, the past six, seven years as basically being an experiment telling us how much do people hate inflation. And they really hate it. And we had not had a big economy-wide test of this in a really long time. We weren't quite sure, right? It's a very different economy than the last time than we had this kind of like runaway prices. Plus, what's worse now is the price of housing, of childcare. You know, they're nuts. And people just despise it. It's on. Hi, everyone, from New York Magazine and the Vox Media Podcast Network. This is on with Kara Swisher, and I'm Kara Swisher. Today, we're talking about the state of the U.S. economy.

Inflation has remained stubbornly high above the Federal Reserve's 2% target since March of 2021. Rising costs for basic necessities like housing, food, and energy have led to what many Americans feel is an affordability crisis. The AI boom is fueling massive gains for a handful of tech companies while nearly through. three-quarters of Americans worry that AI will eliminate jobs in some industries, according to a recent Reuters Ipsos poll. Add to that, the likely expansion of the Iran War and President Trump's renewed trade war, and it's no surprise that American's economic outlook is somewhat pessimistic. I've gathered a panel of experts to break down some of the biggest issues facing our economy right now. Annie Lowry is a staff writer at the Atlantic and the author of Give People Money.

Catherine Rampel is an MS-Now contributor and the economics editor for, the bulwark. Claudia Somm is the chief economist at New Century Advisors and the founder of SOM Consulting. She previously spent 12 years at the Federal Reserve Board where she developed what is known as the SOM rule, a way to identify recessions in real time. I think it's really important to talk about the economy. Obviously, it's going to be the biggest deal in the election, and it's what people are worried about right now, given all the various forces at work at the economy, from the war to AI, to just a feeling that something is off. so it's important to get some clarity here.

Our expert question today comes from Mariana Matsukato, an economist, author, and professor at the University College in London. So stick around. Support for this show comes from Odu. Running a business shouldn't feel like surviving a software group project. One app for accounting, another for inventory, another for sales, and somehow none of them ever talk to each other. That's where Odu comes in,

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Try it today for free at odu.com slash kara. That's O-D-O-O-O-O-com slash Kara. Annie, Catherine, and Claudia, thanks for coming on on. Thank you for having me. Yeah, great to be here. Yeah. So before we get to the data, let's start about how Americans are feeling about the economy now. A new Washington Post-Ipsos poll found that people are generally pessimistic with one in five saying they think the economy will improve in the next year. That's not very good. What do you, each of you, just overall, what do you think the biggest factor driving economic pessimism is right now? Catherine, Annie, and then Claudia. I think people have kind of been soured on the economy for years at this point. And in some ways that make sense and in some ways that do seem. out of whack with the data, like prices have been elevated. Wages have not been, depending on

how, which measure you use, have not been keeping up, particularly since the Iran war started. But, you know, obviously the elevated prices, elevated inflation predate that. We've been dealing with above target inflation for over six years at this point. So there are a lot of things to be cranky about. That said, the degree of crankiness does seem a little bit outside. relative to the amount of crisis, if crisis is a quantifiable term in the economy, it's a combination of high inflation, kind of stagnant economy, and frankly, a lot of political disgust that sort of ends up as referred pain towards the economy. I think Catherine is completely right.

There's a lot to not like about this economy, even relatively high income families that are making in the low six figures, families, which, you know, we don't generally worry about them a lot versus a family that's making $40,000 a year are really squeezed by price pressures. That said, I think that basically the consumer sentiment and the economic sentiment numbers are no longer exactly reflecting just economic and consumer sentiment. I think that they have to do with our media and political environment. And so I think that those numbers essentially are not exactly telling you a lot. about real economic conditions versus 20 years ago. But I think that the sense that we are in

a declining democracy, that we have complete lack of trust in institutions and one another, some horrible hangover from the trauma of COVID and everything that came out of it, and also the media environment that we're in, where the media itself has gotten more negative and also people are getting their news now from short form video, from these sources that I think can really color your perception of what you should have and what you do have. I think that those numbers now, we should think of them as a more generalized sentiment number, not like how much money do I have in my bank account. Right. How do I feel?

Yeah. And we could see gains in the economy and they would show up in the numbers or depressions in the economy and they would show up. They've just become a different measure in my mind. So we should include more measures. Yeah. Claudia? So I would add one more thing to the mix in terms of the uncertainty, the insecurity, the

insecurity that people feel. So a few years ago, you know, inflation had come down some from his pandemic highs and unemployment rate was low. And so I'm an economist. I was looking at all this data and it really looked like things were at least improving, not great all around, but improving. And yet these consumer sentiment measures were still really negative. And I, you know, was trying to talk to people and be like, help me put the pieces together. And one woman point out to me, she's like, you know, on paper, we do look better than we were a few years ago, like coming out of the pandemic, but she's like, I don't feel it because it feels like the next shoe could drop. Right, whether it's AI or whatever it happens to be.

Right. And I think that I really trace a lot of this back to the pandemic, which was a huge, out of nowhere, just upended people's lives. And frankly, between policy decisions and other, it just feels like we're in this rolling mess of uncertainty. And that, I think, weighs on people. And also, as they try to navigate, prices go up or there's tariffs or there's this and the job, Like, it takes a lot of effort to go do the bargain shopping, to go do, you know, try to figure out the way to deal with this. You go get a new job. Do you not? It's like a tax on people.

They don't pay it necessarily directly, but it just weighs on them. So I've come to understand, like, as always said, like, those measures are picking up more than economics. But I think it is relevant still to policy. More of a vibe thing, like in that way. So recent Labor Department data show that inflation did cool in June. The brief Iran war ceasefire. gave Americans a break on gas prices. That's not expected to be the case this month. Catherine, after several years of rising consumer prices, are Americans just more price sensitive?

Or how is it showing up in spending behavior when it comes to persistently high food prices? I have noticed them. I've never noticed food prices. And you see them everywhere you go. And you don't know why. Yeah, I mean, I think that there's some cognitive dissonance in all of this, which is one of the underlying themes that we've been talking about, which is that prices are high. People are cranky, but people are still spending. And I know Annie's written quite a bit about this as well. And so people are like mad that they're having to spend more money, but they're still spending the money as opposed to pulling back on their spending in response to those higher prices. But I think to Claudia's point about that mental tax, that is something that I have been hearing

from consumers for a while. So like they're spending money, but they have to think more about each decision that they make. It's not like you go to the grocery store and you just have your list and you go down the aisles and you get the peanut butter and you get the eggs and whatever, like, maybe you're not going to get the fancy peanut butter this time. Maybe you have to, like, price compare and you're going to get the private label peanut butter. And so people are spending, but there's more exertion that goes into every choice that they make, and that is exhausting. But as long as people continue to have jobs and unemployment is still relatively low by historical terms, that means that they are able to keep spending. So Annie, and.

One of the weird things about what Catherine mentioned is that by some measures, people are less price sensitive. They are emotionally, their feeling is more price sensitive. But say that we have like a coupon and we give 50% off, it doesn't have the effect that it might have had 20 years ago. But I really think of, you know, the past six, seven years as basically being an experiment telling us how much do people hate inflation? And they really hate it. And we had not had a big economy-wide. test of this in a really long time. We weren't quite sure, right? It's a very different economy than the last time than we had this kind of like runaway prices. Plus, what's worse now is the price of housing, of childcare, you know, they're nuts. And people just despise it. Right. So you wrote about the great affordability crisis back in February of 2020, and you noted the price of housing represented

the most acute part of the crisis. It's been six years. The U.S. housing market still feels broken. There's more sellers than buyers at this point, the new Minneapolis Fed research found that only 53% of American adults own homes they live in. They're not buying, and at the same time, the market seems very flat for a lot of people I've talked to. So what's the underlying problem of probably people's biggest cost that they would pay for? Far and away housing, even if you are a person who is paying in your mortgage or in rent an amount that an economist would say you're doing okay, you still might not be happy and it might not be easy to see that. Because like let's say that you're paying an amount you can afford $1,800 in rent or something like that,

but you're still living with roommates or you're living in a neighborhood that you don't like or you're putting off, you know, proposing to your partner. That's not going to show up except in a sentiment figure. And I think that's part of what we're seeing. But the housing, there's not an easy answer here. Some places are really building. But I think the truth is that, you know, the housing market is in a really huge. tough place and it's going to be for a long time. And I think if we saw interest rates come down, which would help with affordability and help with building, we have so much pent-up demand

that you might not see prices fall, which is a really tough thing. Right. So the 21st century Road to Housing Act became a lot earlier this month. The package of provisions aimed at increasing the housing supply and making homes more affordable. What is that actually accomplish? I don't think it's going to accomplish a tremendous amount. Look, I think that there's not a lot of federal policy on the table that can affect this because overwhelmingly this is a local concern. And so we can incentivize local places to allow more construction. But you still have a lot of homeowners who say, hey, I don't want that giant thing in my neighborhood. You're still going through the more than 10,000 U.S. jurisdictions that are in control of this and asking them to go one

by one. I think actually the best policies that we've seen have been state and local. So California, for instance, has had a number of policies to induce building. But, still, right? Like, timber is really expensive. Labor is really expensive. This isn't a situation that we got into quickly, right? Really, I think the roots go back to the housing crisis before the bubble popped. It's not something we're going to get out of fast either. So, of course, the job of keeping prices and inflation is under control belongs to the Federal Reserve, and it is a new chairman, Kevin Warsh. We're now taping this on the day before the July meeting, and it'll come out the day after. But let's zoom out. Claudia, I know you've expressed some skepticism about Warsh, in particular,

how he sometimes uses standard economic language in non-standard ways. What do you make of him so far and his efforts to, I assume, get inflation in check so that he can lower those rates that Annie talked about? It's really too soon to have a firm opinion on Kevin Warsh. I mean, that's also partly by his design. He's been pretty quiet about his views on the economy, his views on what should be done. He's made very clear, we're going to have price stability. He's going to get inflation down. But as we talked about with housing, a problem that it took years to build, it's going to take some time to bring it back to be fixed. And inflation has been running higher than what the Fed puts as its target of 2% for several years now. So it's not going to turn on a dime with a new person in charge. I think,

you know, the Fed is really aware of the inflation problem. Thankfully, we are at a moment right now where the labor market, if nothing else appears very stable. So the Fed can kind of focus its attention on inflation, but it still has a tough decision to make. Should we, step in and raise interest rates because that's creating more cost for people. And if you don't need to do that to get inflation down, well, then maybe you should hold off and stay on the sidelines. So it's hard to tell where the Fed is headed at this moment. And that's really going to be the judgment in the end on Warsh's leadership is can the Fed deliver on getting inflation down. And Trump doesn't want interest rates to rise, so there's political pressure. Yeah, I mean, I think that's the big challenge

for the Fed right now. Like, it's always hard to be a Fed official. and try to like make sense of all of the data, some of which is conflicting. It's especially hard when you have some messiness in the data today. But it's especially especially hard when you have Donald Trump basically trying to screw up your job, which is what has been happening, right? That Donald Trump does not understand or is unwilling to learn that the Fed in order to be effective needs to be politically independent. Because if people don't believe that the Fed is independent, if they believe that politicians are control of the money supply and are just like willing to print money whenever, then they don't believe that inflation can ever get under control. It becomes sort of like a self-fulfilling prophecy. And Donald Trump, by very loudly leaning on the Fed, saying that he wants, you know, his new man at the Eccles building to cut interest rates actually undermines their ability to cut interest rates in a way. May I ask Claudia, is he his man, do you think, from what you can tell? Well, the president chose Kevin Ward.

to be the venture. Well, he chose Jerome Powell. So I take that is there was some alignment. The president saw Kevin Warsh, someone he wanted to have at the Fed. Do I think that he's taking orders directly from the president? No, I don't. But he has an alignment. And I think one thing that's been unfortunate to what Catherine's talking about, there's some discussion of, well, the Warsh Fed, they need to raise rates just to prove he's independent.

It's like, no, we should not be doing monetary policy to, like, satisfy some political statement, either direction. Right, either direction. So every episode we get a question from an outside expert, here's yours. Hi, Kara, hi panel. I'm Mariana Matsukato. I'm a professor at University College London, currently in Italy. I am Italian. So my question to use the following. You're talking about the state of the economy, housing, cost of living. So I've written quite a few books, the recent one called the Common Good Economy, on how it's actually impossible to solve any problem with the current way we think about government is just, you know, at best fixing a market failure. Oh, is reactive, too little, too late. And I'm just wondering from your own experiences, maybe the cities you live in, where you've seen government of any type, you know, city level, regional level, national level, global level, actually get stuff done and do it through objectives. You know, there's so many different ways to do capitalism. And if you look at Vienna, if you look at Copenhagen, how they do housing and social housing is so different from American cities. But I think it is important to give people hope that there's different ways of doing things. And by looking actually some positive examples where the way that we governed went after the source of the problem instead of, you know, the symptom at the end. Thanks.

So Catherine, you go first and then Annie and Claudia. I will talk about something that's actually not where I live, but that I've reported on before. So there is this sort of pilot program. I don't even know if you could call it a pilot since it's been around for a little while now that started in Flint, Michigan to give cash. to pregnant moms, basically to address poverty and the various ancillary consequences of poverty at the source, that basically the idea was that they were prescribing cash as a way to deal with a number of public health issues. It's called RX Kids. And so this started in Flint, Michigan. It turns out that, you know, based on the data that they have available, where they were giving cash to everyone, everyone within the city limits, who, once they were pregnant, they were eligible, and they continued to be eligible, I believe, for a year postpartum. Anyway, that they determined that it resulted in much better outcomes in terms of higher birth weights and lower maternal depression rates,

things like that. This is top of mind for me, I think, because I got a press release today saying that they are expanding it to part of Ohio. Pannie? I think this is such a fascinating question. And I love that it was posed by the person that it was posed for. I'm such a big fan of her work. You know, in the last 10 years, I think the most amazing governmental innovation that I can think of was in Project Warp Speed, right? We got a COVID vaccine far faster than we expected. It saved a ton of lives. And the material good that it did, I think, was really significant. But it didn't build trust in government, right? In fact, I think the vaccines were part of this broader collapse in trust in institutions. And it's something that I think about a lot, right? How do you have a good program that also creates these benefits that people can recognize it's a good program, that people can feel some trust in government? Like, how do we create these systems such that we're all in the same universe and pulling towards the same goal? It's been such a long time since I've seen that and felt that.

Right, right. Claudia? Right. So it inverts the positive spirit of the question. But one thing that I've spent a lot of time watching, Reese, is just the effects of downsizing the federal government. federal employment is the lowest level in decades, and yet it does affect the government services. Like, I see it a lot in terms of the statistics. You know, they don't have as many staff, like 20% less staff, less resources, collect data.

But also this came up in the CDC outbreak. They didn't have their communication staff. It's just hard to do these services. And I think it's in the spirit of you don't miss something until it's gone. And it's important to really underscore, like, the quality of the services we had. And they've really slipped, and that can be fixed. So that's, you know, kind of what I would focus on. Don't it always seem to go?

You don't know what you got till it's gone kind of thing. And now we have, you know, exploding diarrhea and measles at this point. Among other horrors, yes. We'll be back in a minute. Support for the show comes from Gusto. You didn't start your business dreaming about payroll tax deadlines, yet there they are every quarter sitting on your desk. Gusto handles that part quietly in the background so you can stop dreading the calendar.

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Try O-D-D-O-O-D-O-com. That's O-D-O-O-O-D-O-com. So let's take a step back and look at what else is fueling inflation starting President Trump's new tariffs. After a temporary 10% global tariffs expired last Friday, he imposed dozens of new tariffs of 10% to 12.5% on goods for more than 80 countries. Trump said he has additional. terrorist plan, including duties of up to 200 percent on generic drugs, the Supreme Court struck

down most of his global tariffs in February. Catherine, why do you ask is, how's the administration legally justifying the latest round? So there are different tariff authorities that the president can use, and they have, every one of them tends to have, like, pretty constrained rationales. And so they're kind of cobbling together any sort of pretext that they can for tariffing other countries in ways that are, you know, look, I'm not a lawyer, so I can't speak to the legality of all of this, but are at least very intellectually inconsistent. The first round of terror sent shockwaves through businesses and supply chains. And you described as Trump's economic abuse. Are they more prepared, given all these hijinks that he's

attempting to impose more of them on them? They being the administration. The businesses. No. You know, it's just like we were talking before about how it is a tax on consumers to have to deal with inflation. It is absolutely a tax on businesses to have to deal with, you know, basically having to watch, have someone full-time monitoring Trump's Twitter feed or his truth social feed, because that's how policy is being made. It's not being made through the normal administrative procedure act processes. It's being made by Trump's itchy Twitter finger. And as a result, businesses are having to devote a lot of time, a lot of resources, a lot of labor on calibrating, like, do we send the shipment now? Do we keep it on the boat?

do we keep it at the dock? Do we keep it at the port? Do we try to put it in this warehouse? You know, it's just such a tremendous, inefficient waste of time and resources, not just the actual cost of the tariffs, but it's like managing all of these logistics they did not have to think about before. And not only managing that, but like managing relationships with the administration, right? This is the reason why corrupt governments, non-democratic governments, tend to have, in general, worse economic outcomes. because businesses have to spend a lot of time, like, figuring out how to, like, appease the authoritarian rather than what makes the most business sense. So the economy, obviously, dealing with the war in Iran, the affordability crisis, inflation, we talked about, Annie, what are the short-term and long-term consequences of Trump continuing his borderline obsession with tariffs? This is bad. This is really bad. And I think that in some ways, when the original large tariffs got pulled back, people stopped paying attention. But businesses did not.

Businesses on the margin, especially small businesses, right, like a Ford or a Google probably has hundreds of lawyers dealing with this stuff or they can bring in legal counsel. It's still money spent. If you're like a four-person business, you're not going to be able to do that. You could be bankrupted, right? And we actually saw that happen. And so I think it's one of these things. Like, it's just why. And I think he'll just continue doing it for as long as he's in office.

He really cares about it sincerely. He does not care about a lot of policies. sincerely, this he cares about sincerely. This is he does. But to quantify the strain on the economy of these compounding sources is also difficult. Very hard. Because it's very hard to do. So, Defense Secretary Pete Hegseth told lawmakers last week that he estimated the Iran war to cost $37.5 billion in just the past few days the war has escalated and oil prices have shot back up. So far, the U.S. economy has been pretty resilient. Claudia, at what point will Americans feel the broad impact of the war beyond food and gas prices? And what are the potential

economic consequence of yet another extended war in the Middle East. So as the conflict drags on, it has effects on energy, food, it can potentially seep into a lot of other goods and services. I mean, energy is really a cost that isn't a lot of what we are spending our money on. So a lot of it depends on how long the conflict lasts and how bad it gets, right, in terms of the disruptions in like the Strait of Hormuz in the Middle East. So it's all pointing in the wrong direction. It's, you know, without knowing how long it lasts, how bad it gets, it's hard to quantify, impossible to quantify what the effects would be on people. But it goes in the direction of costs. And it's just the war in the Middle East is another example of the administration pushing forward policies that unleash a whole set of costs on the economy.

Just like the tariffs unleashed a whole set of costs on the economy. And that is really, we can see that in the inflation data. The broad-based increase in the price level over the last year and a half really does tie to some policy. tariffs, yeah. They may be justified in other like outcomes, but like immediate, they are costs. And another thing you see from the administration, they really don't recognize that they're creating those costs. With tariffs, they're still like foreigners are paying them. Like there's really good data to say foreigners are not paying them. We are. They've been corrected many times. They've been corrected many times on that topic. And even someone who does know Scott Besson pretends otherwise, which is, I think that's what they do on a lot of issues. It feels like the economy is kind of factor. in, though, it trumps erratic decision-making, the taco, as it came to be known. When could that shift where they just assume erratic decision-making, correct? I think that they absolutely already do. I think that if you are talking about financiers in Wall Street, they have proven remarkably adept at making money off of not a rising tide lifting all boats, but chaos, right? So you have

people that are algorithmically trading off of, you know, truth social posts. I think that there is a fair amount of, right, just kind of like guessing where he's going, Trump has always been quite suggestible to the people that he's talking to. And so I think that that has become another source of kind of like betting around this. And I'd note that there's a lot of things coming down the pike for the Trump administration that I think is going to prove really hard, biggest one of which is, in my mind, the Medicaid cuts. In terms of people seeing effects. Yes, in terms of people literally losing their insurance and literally not being able to afford cancer treatment. I mean, we've already seen millions of

people lose snap benefits at this point as well. And that coinciding with rising food costs because of the war, because of some things that are not Donald Trump's fault, including like a drought in the Midwest and El Nino this year. You know, I don't know that we can lay all of that at the president's feet. But you do have all of these other factors pushing up prices at the exact same time that support for people to absorb those costs has been declined. And so those things coinciding has been, you know, bad economically will be bad politically, presumably for the president as well. That said, I don't think it's going to result in some sort of taco where they somehow try to beef up the safety net or otherwise pullback on tariffs. That one he's not going to do. Let's shift to the U.S. labor market and jobs last month. The Supreme Court upheld the Trump administration's authority to end temporary protected status of Haitian and Syrian immigrants.

The ruling affects hundreds of thousands of foreign workers who will be like. let go by their employers this month. The health care industry in particular and elder care rely on this labor pool. We're seeing the impact of Trump's immigration enforcement across industries, including health care, agriculture, construction, and hospitality. Claudia, first, what point do workers shortages start to become untenable for employers and consumers? So at this point, we haven't seen, like in an aggregate level, much evidence of the worker shortages. In certain industries, say, like in construction, there's more pressure, which shows often in terms of like wages growing more quickly. But there's also a lot of demand building out

AI data center. So it's hard to piece out like is it actually a supply issue versus more demand. But that's where we would look first. Industries that are very have a lot of native born employment in them. We do see a big drop in the growth of the labor force. I mean, it's really striking how, I mean, basically the labor force is not growing, which is anomal. Like we just haven't seen that. Right. And so even if we don't end up with shortages and real pressure points that could end up in higher prices, things are slowing down in the labor market overall. And we don't see a lot of dynamism. We don't see people moving around in different jobs. So there's something under the hood kind of fundamental shifting in the labor market. According to the labor department's June jobs report, the labor market appears to be in better shape than it was this time last year. Job growth has picked up. Long-term unemployment means people are out of work six months or more is near its highest level in years. I did an interview with former Commerce Secretary Gina Romando, and she made the point you have to look deeper, as you were noting, than the top line stats to see whether the labor market is healthy. And she suggests, by the way, it's not. First, Annie, what's hiding underneath these numbers and then Catherine?

There's a lot of weirdness being hidden under there. So I think that you are seeing, we haven't had growth in the white-collar labor market. In fact, it's shrinking a little bit. Not hugely, right? We're not seeing mass layoffs. But I think that, plus all of the talk about AI, is really, really, really freaking people out. Young college graduates are in many ways having a little bit of a tough time in the labor market. The AI build out is having some positive effects in some places.

So you can see like rising land values for certain farmers who are selling their land for AI. And I think that there's this question of fragility. If you have consumers that are very tapped out, if you have businesses that aren't hiring, if just everybody is a little bit concerned about what's going on, what does it take? The economy has proven enormously resilient over the past six years, shockingly resilient, right? Like, whenever we get another recession, it's going to be one that was predicted that it would have been here every month for like the last, you know, five years. So I'm not saying that. I do think that the labor market is pretty good and you can see that in a lot of ways.

But I do think that there are some strange things happening, including the way that the AI boom is and isn't supporting the economy right now. get to AI in a second, Catherine, about labor. So I do want to go back to people who have TPS, who are about to essentially have their livelihoods ripped away from them and their legal status ripped away from them. That's imminent, according to recent reporting. And you're going to probably have some mass detention campaigns that happen in places like Springfield, Ohio. So I do think you're going to see some major disruptions coming up in the next year as a result of all of that. And maybe maybe that'll show up in things like prices and things like wages and maybe that'll just show up in shortages.

You know, people not being able to get the groceries that they need are not able to get the health care. Health care. Help they need. Yeah, exactly. Yeah, because those are two professions, two areas that really do depend on these people. We'll be back in a minute. Support for the show comes from 11 Labs.

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AI as a contributing factor to layoffs, although now that's unclear. At the same time, a 2025 MIT study found that despite an estimated $30 to $40 billion in enterprise spending on generative AI, 95% of organizations saw no measurable return. something Scott and I've been talking about for a long time. Claudia, to what extent are companies engaging in so-called AI washing using tech to justify layoffs and what evidence actually does it tell us about its impact on the employment so far? Anytime a company does a mass layoff, I mean, they're going to try to package it, explain it in a way that will go over well with investors, right?

So I do think there's an aspect of AI may have enabled some of these companies to reduce their headcount, but there were probably a lot of other reasons, like they overhired during the pandemic when they thought, you know, everyone was going online forever. And, you know, so there were probably a whole host of reasons. And they put forward the one that investors might be most positive about. Like, oh, you're using the technology. So I think that's happened. But I also would say that's probably not a new phenomenon. Right. And that's why you don't want to just take the companies at the where. Do you want to go look and see, can we make sense of it in the data? Do all the pieces fit together? And frankly, what has been really challenging, this is a relative

new technology. There's a lot of experimentation going out there. The data, it's tricky to catch up with it. And you have really good studies, sometimes using the same data that'll just define exposure to AI a little differently. Or they might set up the comparisons a little differently and come to opposite conclusions on how this is affecting, how AI is affecting employment. So I think it's just more that like we're at a stage where you can't draw a firm conclusion because there's just a lot of experiments running in real time. And maybe some of those companies making the announces, maybe for them, they actually are doing the layoffs because of AI, but that is not the broad sense right now. And automating away human beings is very difficult, right, like with all the tasks that we do. Correct. Yeah. Yeah, there isn't much effect as there are. But the stock market has been on a tear in the past few years, fueled in part by this AI boom. Pretty much that's what is fueling it. It's been made a lot of people feel rich. Bloomberg, Stacey Venick, Smith recently wrote about the wealth effect. which some economists estimate has accounted for roughly a third of consumer spending growth since the pandemic.

It's rich people buying things. They're feeling good about themselves. Again, Scott talks about this a lot. But Alphabet and Tesla's earnings last week, concerns about growing AI spending help wipe out roughly $890 billion of the combined market value with a magnificent seven, these companies, focused on AI. Together, these companies account for about one-third of the S&P's 500's total value, which is astonishing. Catherine, can stock prices continue to support consumer spending and the broader can rich people feeling a little less rich? And, you know, SpaceX is down, Tesla's down. All the companies are pretty much down, except for Apple. I mean, if I knew the answer to that question, I would be a very rich woman and I'd probably keep the information to myself. I do not know the answer to that question. I will say that one thing that is troubling, that is like another one of these lurking risks under the hood is that so much of the market is driven. by just this very small handful of stocks, right? That in terms of market capitalization, in terms of investment, in terms of revenues, it's just like they are the whole story.

And so that's concerning, particularly given fragility elsewhere in the economy. If we've kind of put like all of our eggs in this one basket and then that, I don't know, what the rest of this metaphor would be, the basket explodes, then, you know, a lot of this other fragility could become a lot more visible. All of these other things we've been talking about, all of these other things, all these other factors that have been battering the economy, in many cases, unforced errors. One of the themes of all of this is like there's a lot of precarity, there's a lot of insecurity, but there's also a lot of resilience. But is it resilience or is it just that like there is this one part of the economy that's propping everything up? And if it ceases to continue doing

so what happens to all of these other problems that we've been talking about, particularly since we have really erratic policymaking that is making it harder to stabilize the rest of the economy. Right. I know you feel bad that Elon's not a trillionaire anymore, but we'll move on. I feel very sad about that. I thought about that. So, Annie, you recently described the AI economy as, quote, a trillion-dollar boroboros of buying and selling investment and equity staking all happening between San Francisco and San Jose. That's a snake-eating his tale for people who don't know. Talk about the concentration of capital tell us about the durability, the AI boom, because it feels a little to me,

like when I was covering AOL in the early days, and it was the same $2,000 going around. In this case, it's $2 trillion or $200 billion. So I think there are a bunch of things to give us some hope that this is going to be kind of okay. So one is that a lot of the companies doing the borrowing and the buying and the selling here, they really are profitable. Google is really profitable. Like actually, that's not fake. And a lot of the money going. into this is actually cash. It's not borrowing, or at least it used to be. Well, they're borrowing. They recently tried to borrow. Now they're borrowing, right? And so when there's two really, really big things that I'm concerned about, first is the circularity, right? This is all a very

circular economy that they are all buying and selling. They're all interconnected with each other and becoming even more interwoven. So say, for whatever reason, we need way fewer chips. All of a sudden, you have, you know, a huge decline in the price of one of these companies, but that means that they can't pay their debts to the other. The second is that the AI buildout has been so expensive that these companies are going into debt. So they are issuing corporate bonds and they are borrowing enormous sums not from the traditional banking system, but from the shadow banking system, non-banking lenders.

Those deals are structured to be off of their traditional balance sheets if you're not starting to get worried. The deals are very, very opaque, right? We don't have a lot of insight into who is less. lending what for whom, but we have reason to believe that institutional investors, so people taking your pension or your index funds are really helping this out. So if we don't have that visibility in, and we have a huge amount of money that is being staked on a very circular economy that is making a bet that the returns on AI are not just going to come in, but are going to come in on a schedule

that it will allow them to pay their bets off. Maybe it works out. Maybe it doesn't. And the entire like all economic growth right now is predicated on this one bet that, you know, very interestingly, your average person has nothing to do with if they are not investing in it. The way in which they are being touched by this is mostly through, you know, if they have a retirement fund. 4-1-K. So if we're headed for an AI bubble collapse, Claudia, how vulnerable is the broader market and who will be impacted? An AI bubble collapse at this point would be very damaging, right? Because it has, you're talking about in financial markets, There's a lot of wealth tied up in terms of the AI spend in the quote-unquote real economy.

We can see a lot of capital investment that's happening. I mean, real, like durable goods are being bought to put in place. And I mean, that's very exciting to build up our physical capital. We can be very productive. But that is certainly in the kind of real economy, AI has build out is very much important. Not doing it at, but it is important. And then the other piece that we kind of hinted at and touched it a little bit is it is a a positive overlay, right? Especially in financial markets and businesses, AI is the technology of

the future. It's going to be transformative. It's going to be profitable. That's been a real, like, positive message, a positive vibe that has counteracted a lot of, like, negative things. Like, we have a war in the Middle East. And I do worry, too, that taking some of that positive overlay away could just amplify the collapse. One thing I'd like to point out, I think has been a positive development in recent months. You're seeing, I think, some healthy skepticism. in financial markets. So announcing more capital expenditures, the market pulls back some. And the bonds they're requiring bigger interest rates. Credit spreads are going up. So there is some telling markets, hey, maybe you're going a little too fast, slow down. Are either of you, Annie, or Catherine,

worried about a bubble bursting here in the stock market? I mean, I'm worried. Look, I think it's very easy to see the negatives of all of this, certainly, including all of this investment that's been going into these new data centers, all of the competition, because a lot of the AI investing companies are like assuming that it's a winner take all market. And so if like somebody actually wins, does everybody else just suddenly pull out? And what kind of knock on effects does that lead to for those firms and for those that depend on them because of all of the circular dependencies that Annie was referring to. So I'm definitely concerned about all of that. I do think it's important to sit a little bit longer with a point that Claudia made, that there

will potentially be some positives. It's easy to see which jobs disappear as a result of a big disruptive new technology. It's harder to imagine what jobs do come about. And I don't want to sound Pollyanna-ish, but I just want to like temper a little bit of the doom and gloom. about how lots of people are going to lose their jobs. And that may well be the case. We are seeing that, particularly in certain companies. You know, maybe it's AI washing and maybe it's not. But there will be jobs that are created.

There will be people who are made more productive. And we don't know exactly where those benefits will fall. And I am hopeful that we will end up seeing lots of opportunities created by all of this in addition to some dislocation. And that, you know, we really just need to work on, I think, beefing up the safety net. so that those who are in that difficult transition are helped out in some fashion, right? I mean, I think we've done a poor job in the past at helping people transition when their jobs are displaced, whether it's because of globalization.

Yeah, seen after. Globalization or automation or anything else. But I do think that there are a lot of opportunities and what we should be thinking about from a policy perspective is how to make sure that those opportunities are available to as wide of a swath of the population is possible and that we help the people who are hurt. Annie? I think that the thing that I am concerned about beyond just a stock market correction, which would be painful for all of the reasons that Claudia and Catherine identified.

And it does mean that, you know, a lot of people, right, like there's always ancillary people that had nothing to do with it and they are going to be hurt. The other thing I'm somewhat concerned about is that this is taking place, again, outside of the traditional lending system. So I've had the question of, like, are regulators on top of this, are they? The non-banking institutions should be, but this is new and it's unusual, and these deals are strange. So again, I'm not worried about like an Apple or a Google, even with huge losses. They're going to be fine. But like, what about like the smaller little

guts of the system that we don't know? Are we really keeping a good eye on that? I don't have a great answer to that. But to Catherine's point, we think about the jobs created by AI. We think, oh, it should just be software engineers or something. And it's like, no, actually, when the whole economy gets wealthier, you get all kinds of new jobs that are created by AI in some strange way, but are not like literally tied to it. So I do think that that's positive. And there are other really positive things happening in the economy. We have some cool things happening with energy. And I think that it's all a matter of. We know that we still have this very broken safety net, all of these policy problems, this lack of trust. But are we allowing these really positive things to come through? Yeah, absolutely. So it's a theme that's the theme that's been underlying, though, everything we've talked about, the giant gap between what's happening in the markets and what's happening in people's lives, right? Earlier this year, labor's share of the economic output hit an all-time low at this point, while profits hit a near record. How long can the gap continue to grow before something gives in that regard when these benefits you're talking about accrued to more than just a small group of people?

Catherine, you go first, then Annie and then Claudia. I mean, this is a political economy question, right? It's an economy question, but it's also a political economy question. We started this conversation by talking about like economic sentiment and what does that mean? Is that really political sentiment? And I think all of these things are wrapped up in one. My fear is that as people become more disaffected with economic outcomes, more resentful that they've been left behind, that somebody else is getting ahead, maybe it's the immigrants, maybe it's the foreigners, maybe it's the billionaires, that politicians become less prone to trying to try and to fix actual problems and more prone to just doubling down on blaming the scapegoats. And blaming the scapegoats is easy. Punishing the scapegoats is easy. Actually fixing the problems is a lot harder. You know, there's a part of me that worries that we're going to end up in this sort of like infinite doom loop, like in Argentina, where you have the left-wing populace and the right-wing populace just alternating power and blaming each other and never actually

solving problems. So that's the real concern that I have. that we do have these real underlying problems with economic inequality, with stagnation of living standards. And I worry that our political leaders are not as focused on actually doing the boring technical work of fixing them and instead are much keener on... To tap into the anger. To tap into the anger and to find the easy scapegoat rather than the hard fix. Annie? I think that that is completely correct. One thing that I think has been fascinating about AI is that, you know, in the early mid-90s, when people were getting computers in the Internet, there was really this broad feeling of like, oh, my gosh, this is going to be amazing, right?

Like, we'll be able to connect with people all over the world. This is going to change this, that, and the other, right? Like, maybe we'll send more people to the moon, all of this. And I think in part because the AI leaders have been so vocal about the downsides that they see of their own technology. right? Like I always think, like, can you imagine if Ford came out and they were like, you know, the car is going to be great, but we're going to kill a bunch of your kids, right? Everybody would be like, what are you talking? They'd be like, some of your children will die horribly. We're so sorry, but it'll still be worth it. It is something else. That people are now, they're like, don't do this to us. A.I sentiment is really, really low. And I think it's because they see it as another technological advance that's going to lead to them getting screwed. And what nice thing I think about inequality is that. that it's very amenable to policy solutions. This is not something that we don't know how to fix. And so I do think that starting to reduce this sense of fragility for people, make sure that there are those AI guardrails. So it's not going to be that all of a sudden and all of these

workers are headed to retirement, believing that they're never going to have the lives that they wanted. I think it's really tough. And we've not seen that kind of deep policy work to just get the, you know, everybody feeling involved again and productive again. Right. Claudia. And that declining labor share that you talked about, that put some really important institutions at risk, right? And so even if AI doesn't mass unemployment, maybe makes people more productive, I don't really think it's going to push up wages that much in terms of getting a bigger share. And so many of our programs talk about social security as one example. Like, so much of our taxation really depends on workers making money and that can feed into it. If the

workers are not the ones gaining, if it's more and more, more. going to the capitalist, which some of that is good, but it will cause some of those programs to be really under strain. So you think we have discontent right now. Talk about the discontent when Social Security falls apart, right? And we are not that far from that program really coming into conflict. So I'd say a lot of the trends we're talking about, they're pointed to actually get worse, which is going to have some big conversations in the political economy space about, well, how do we fix these problems? Because people are not going to be happy. if they're just left to fall apart those kind of programs. Right. Absolutely. Anyway, on that happy note,

what one thing is positive that you see about the economy and what thing you worry about the most? Catherine, you do it first and Annie, then Claudia. I don't know if this is about the economy or the political economy, but I think that people are starting to recognize the things that really matter about the economy that they may have taken for granted. And that means some of our institutions that help make the economy run. That means immigrants who bring new life, new skills, new energies to the economy, and the importance of community. I feel like that there is a renewed appreciation for, you know, these are partly about democracy and these are partly about thriving civil society, but these are also partly about understanding

what our economy needs to function, that we need rule of law, that we need trust. And your biggest worry? I guess my biggest worry is the dissolution of the safety net, which, you know, is one of the things we've been hammering on this whole discussion. to the anger part. Annie? Yeah, I'm really, really excited about the new cancer medications, GLP-1s, which are really improving a lot of people's lives. There's new biologics. There's new treatments for previously intractable conditions like cystic fibrosis, which is so exciting. I am terrified that we are pulling away the basic scientific funding that has made a lot of this

possible. GLP-1s came in part from research on the helium monster. And this is precisely the sort of stuff that now Doge and the Trump administration wants to cut, right? When we're at this moment that, you know, because of CRISPR and other things that I do not understand, we seem like we might be able to actually really improve people's lives. And save costs. Yeah, exactly. And I wish that everybody had access to the medications. You know, these are really expensive. I wish everybody had access to the medications they need. Good. Claudia. Right. So mine is with the low, higher, low fire, labor market. First, the positive, the low fire. Layoff rates in aggregate are very low. So if you're a worker who has a job and really likes your job, is a good job, like this is a good labor market.

The flip side, the thing that does concern me is the hiring rates are really unusually low for a labor market that overall looks pretty good. And so this is an incredibly tough labor market for people coming into the labor market for the first time, trying to, you know, get back into labor market, or are stuck in a bad job. So like, I do. worry about that half of it. Like the hiring rates need to come up. Okay. All right. Thank you guys so much. I know we covered a lot of stuff. We were trying to get to a lot of stuff, but I really appreciate it. Thank you so much. Thank you. Bye. Thank you. Bye. Today's show was produced by Michelle Aloy, Catherine Millsop, Megan Bernie, Madeline LaPlante Duby, and

Kaylin Lynch. Nishot Koro is Fox Media's executive producer of podcasts. Special thanks to Corinne Ruff, Rosemary Ho, Dave Shaw, and Julia Sharp Levine. Our engineers are Fernando. Arruda and Rick Kwan and our theme music is by Tracademics. If you're already following the show, you've figured out the best way to do capitalism. If not, you're in an economic doom loop. Go wherever you listen to a podcast, search for On with Kara Swisher, and hit follow. Thanks for listening to On With Caras Swisher from Podium Media, New York Magazine, the Vox Media Podcast Network, and us. We'll be back on Monday with more.