00:27There's a lot of questions about what happens when these tariffs are imposed.
00:32But you know how it is. There's a bunch of companies that advance ordered their product.
00:37They may have warned about price increases, but they haven't yet passed on the prices.
00:42The customers may accept the price increases or they may not.
00:45So we'll just have to see how it plays out.
00:48I've been describing this when I'm talking to businesses, which, you know, I do every day.
00:53I've been describing this as driving through fog.
00:55It's just very hard to drive when it's really foggy.
00:58And businesses are afraid to accelerate because they don't know what's around the next curve.
01:03And they're also afraid to put on the gas because you don't want someone crashing into you.
01:07And so by and large, they're pulling over and putting on the hazards.
01:11Well, to that point that you're constantly speaking to businesses, is anyone making big investments at this point or hiring decisions?
01:18From your conversations, do you get the sense that firms are closed to announcing layoffs?
01:24Well, so on the hiring side, you're definitely not seeing that.
01:27Lots of hiring freezes of lots of deferred hiring.
01:30And you see that in the data as well.
01:32In terms of investment decisions, investment moves that were already underway seem to be continuing.
01:37I've heard very few cancellations.
01:40But some of the big things that you might expect to happen when the terms of trade change, I think people are still waiting to get whatever they think is final.
01:49In terms of layoffs, you clearly hear and see about it in the government sector and in those sectors related to government spending.
01:55But outside of that, I just think people have the hazards on.
01:58How long are companies telling you they can hold out before they have to make some sort of decision as to whether to go ahead and invest or to cancel plans?
02:09Well, I think people are pretty patient on the investment.
02:12A lot of these are growth investments, and they're waiting to see what the terms are.
02:16If you're thinking of building a new facility somewhere, you kind of want to know what the rules are before you build it.
02:25And so I think there's a lot going in there.
02:27I also don't think there's much case for for canceling.
02:30Nothing's really changed in the economic environment.
02:33You just have policy uncertainty.
02:34And I think people are just going to wait policy uncertainty out.
02:37They do think there's a light at the end of the tunnel, that there will be some certainty, whether it's the tax bill or some of the trade terms.
02:44But I think they're just waiting it out.
02:46Hey, Tom, I was on Saturday.
02:48I went down to Fredericksburg to purchase a used motorcycle, and I drove it all the way back here to New York through much of your district, I imagine, through Washington, D.C.
02:57of course.
02:58And I was thinking about Doge, the Department of Government Efficiency.
03:02The cuts that Doge made, have they had any specific impact on the companies, on the constituents in your district?
03:10Well, first of all, congratulations on making it through the Fredericksburg to D.C.
03:1695 district.
03:17That's a place that I travel a lot, and it's not very easy to travel it.
03:21There's no question that what we're seeing happen in terms of government spending cuts is affecting, especially the D.C.
03:28metro area part of my district.
03:30You see it in both announced job losses.
03:34If you look at Challenger job announcements in February and March, they were quite significant, particularly government side.
03:39We see it in the week-to-week government spending numbers, in retail spending, particularly discretionary retail spending in the D.C.
03:47metro area.
03:48Job postings are down about a third.
03:50We're even seeing listings come up in the residential real estate area.
03:55So you're definitely seeing that impact in D.C.
03:57metro.
03:57I also want to get your opinion on what's going on with the relationship between hard and soft data.
04:03It's something that we talk about on the show quite frequently because you have the soft data suggesting that things look a lot more stagflationary than the hard data actually shows.
04:12And I'm wondering whether the sentiment data, the survey data that we receive, is still a reliable indicator of what the hard data will eventually reflect.
04:21Well, I separate business and consumer sentiment on that.
04:23I think business sentiment is a very good indicator of what you're seeing.
04:27And what you're seeing in the business sentiment is the surge in optimism that came anticipating pro-business policies after the election has backed off.
04:35And you see hesitancy to invest, hesitancy to hire.
04:39And that's the same thing you're seeing, you know, as you talk to businesses.
04:42And so I think that's very consistent.
04:44By the way, we saw the same thing in 2019, and I think it played out in a very similar way.
04:48Consumer sentiment, which historically has been strongly correlated with consumer spending, has not seemed to be for the last two or three years.
04:57I think that's pretty simple.
04:59Inflation is a big bugaboo in people's minds.
05:02As you know, everybody hates inflation.
05:04And the prospect of inflation drives sentiment down significantly.
05:09And, you know, in today's always-on media environment, where people look at notifications all day long, the notifications they're seeing are tariffs, tariffs, inflation.
05:19And they're anticipating that.
05:20You can see that in terms of the consumer sentiment's expected, inflation five or ten-year, one-year, five-year, ten-year, whatever.
05:27And that takes sentiment down.
05:29There's no evidence yet that that inflation-driven drop in sentiment drops spending.
05:34And nothing I'm seeing in the real-time spending data suggests that spending is dropping.
05:38But that's why I say there's the disconnect on the consumer side.
05:43Sentiment seems very clearly moving things on the business side, less clear on the consumer side.
05:49Tariffs, tariffs, tariffs, as you mentioned, is what we've been talking about for some months.
05:52But now we have the budget bill on the horizon, the fiscal side of it.
05:57What are people telling you in your district, and you have a lot of rural areas as well, about the potential effects on the economy from the bill?
06:04Some see stimulus from no tax on tips, no tax on overtime.
06:08Maybe that's an inflation problem going forward.
06:10And others say maybe there's a problem with consumer spending going forward because people are losing income from Medicaid and other cuts.
06:20How do you see that affecting the economy?
06:23Well, I was in rural Virginia, as I was telling you, earlier last week.
06:27And we had a lot of conversations about how they're seeing policy.
06:30I don't think this has reached the level of much focus in the small towns, at least in my district.
06:38I think people are focused on the basics.
06:42The places people do, they worry about health care.
06:45Rural health care is a pretty big issue in the small towns.
06:49And people wonder about how this, any changes to health care is going to affect rural hospitals.
06:54And I think people are just waiting to see where Washington lands on this.
06:58We had a drop in GDP that surprised me last quarter.
07:04I talked to the experts here at Bloomberg about it, and they told me that's OK.
07:06It's because we were pulling forward so much ahead of President Trump's tariffs.
07:12And now that he's pushing those tariff dates back, I wonder if you think companies and consumers are going to continue to pull forward
07:21and bring so many imports in that we get another big drop in GDP.
07:27Tom, could we have a technical recession because of this?
07:31Well, so the businesses who are facing these tariffs go in one of two directions.
07:36There's some set of people who pull forward.
07:38And you certainly saw that in pharmaceuticals in the first quarter, stockpile inventories in advance of tariffs.
07:45But there's another set that are actually pulling back and saying, and we saw that in China.
07:50If you look at the shipments out of China, out of the ports, and they're saying, look, I'm not taking this till I see where it goes.
07:56Now we've got a different tariff regime in China for some period of time.
08:00We're not yet seeing much movement in terms of shipments out of China.
08:04It, I think, takes a few weeks to get that going.
08:07And I just think we're going to see some back and forth on this this quarter, next quarter.
08:12And we're just going to have to get the other side of it.
08:14Again, it's part of why I say there's so much fog here, because you might say we had a great consumer spending month in March
08:20because auto sales boomed.
08:21Or you might say that people bought their cars before they saw price increases.
08:25Well, as we wrap this up, when you look forward, which part of the mandate do you think will see an effect first,
08:34on the inflation side or the employment side?
08:37I'm more balanced than a lot of what you read.
08:40I could describe to you how some of these forces like tariffs might be inflationary.
08:44I can describe to you how other forces like lower gas prices might be disinflationary.
08:49I could describe to you how, you know, less government spending might be less employment,
08:55and that has issues on the employment side.
08:56I can also describe to you how people who haven't hired for 18 months, if spending continues, might need to start hiring.
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