00:00This report, I know, is just going to be one part of that broader mosaic that the Fed is going to have to consider in about three weeks' time.
00:06Did it give you any more clarity?
00:08Not as much as we had hoped.
00:10But I think you have to take this report in conjunction with the minutes we got yesterday and with Powell's remarks previously,
00:15which suggests that, look, it's going to be a very close call, I think, when the committee decides in December.
00:21We are starting to lean toward them skipping this meeting, again, based in part on the fact that it sounds like a lot of people on the committee are similarly minded.
00:30Also, you didn't see any real, while the unemployment rate did tick up, the momentum in the labor market may be turning around.
00:36That's a little soon to say.
00:38We wish we had more data.
00:40And while their mandate is in terms of employment and inflation, we shouldn't lose sight of the fact that next Wednesday we'll get a GDP report,
00:48which we think could be easily 3%.
00:51Atlanta Fed has it at over 4%.
00:53So that could matter as well.
00:54But with regards to the momentum in hiring, the potential that we do maybe see a little bit of a turnaround in that space,
00:59there was a lot of concern about this idea of just how narrow the job growth was in the most recent.
01:03Something like only two sectors basically accounted for all the growth.
01:06Does that not concern you?
01:07So the diffusion index, which is the percent of industries that we're hiring, actually rebounded to its highest since February.
01:13So you did actually see some more breadth.
01:15You saw some sectors like construction, the trade groups also pick up their hiring.
01:19So, yes, previously it had been just health care and government.
01:23Now we're seeing a little more breadth.
01:25Again, one month doesn't make a trend, but we wish we had more data, but we don't.
01:29So that's the way it is.
01:31I want to bring the conversation back to what the Fed does next month.
01:34We saw the economists, your peers over at Morgan Stanley, no longer expecting the Fed to cut in December.
01:40But on net, our broad outlook for Fed policy has not changed.
01:44So you said that you would expect the Fed maybe to skip this meeting.
01:48Does that imply, too, that when it comes to where they go in 2026, that that view hasn't necessarily changed?
01:54Yeah, and I think, again, that's a message we heard yesterday in the minutes,
01:58which is most of the committee continues to anticipate cuts, but they're not in a hurry to do that.
02:02And I don't think this number would give you a sense of hurrying or a need to hurry, right?
02:07So I do think that, generally speaking, it feels like most people on the committee do want to continue to lower rates.
02:12They just don't want to rush into it.
02:13And, again, I think you heard that even in some Fed speak just today as well.
02:16Well, you make the point that we have plenty of debating points for both hawks and doves.
02:22And it sounds like both factions have been very, very vocal.
02:26Does that mean anything to you beyond that we're going to see dissents when it comes to the December meeting?
02:32Well, look, right now, both aspects of their mandate is being challenged.
02:35Unemployment is drifting higher.
02:37Inflation is high.
02:38And so it would be weird if everyone were singing from the same hymn.
02:45So I think it's actually a sign of a committee where you have a lot of independent thinkers coming at a very challenging problem
02:50and weighting the facts and weighting their preferences a little bit differently.
02:54How much does the actual potential for a rate cut really matter in terms of actually getting the economy on better footing?
03:01I mean, is 25 basis points or even a series of 25 basis point cuts really going to change the dynamics?
03:07Well, a series would.
03:08But the question is whether, you know, we've already gotten some insurance cuts over the last two meetings,
03:14which gets you in a position closer to neutral now.
03:17It's never the case that one cut or one hike is going to matter all that much.
03:22But to the extent it's part of a broader cycle, it will matter.
03:25But it just doesn't feel like maybe there's the same urgency that there was.
03:29Certainly, let's take late last year or maybe even with the most recent meeting as well.
03:34I am curious. I mean, when you take a look at the two sides of their dual mandate,
03:40when it comes to the labor market, when it comes to inflation, again, both sides very vocal right now.
03:46But there have been a lot of articulated concerns about inflation here being stubborn where it is or potentially moving higher.
03:52And I wonder if you share that concern as well.
03:55Well, the stubborn part, yes. The moving higher, not so much.
03:59Right. Today, we had average hourly earnings, which, again, is consistent with the labor market not being a source of inflation.
04:04That being said, we probably haven't seen all of the tariff price pass through.
04:10So I do think we might be stuck in this range in the upper twos on core PC inflation for longer than would make a lot of people on the FOMC comfortable.
04:20With regards, though, to the future outlook, kind of looking into 2026,
04:23there's been a lot of talk about some of the provisions that were in that big spending bill that we passed earlier this year
04:29and how some of those don't really trickle into the economy until next year.
04:34Do you see the potential for a bit of a tailwind from some of those provisions?
04:37Yes, definitely. We do think that some of those new provisions of the big, beautiful bill,
04:42like the no tax on tips or overtime, that might give you about a quarter percentage point of GDP growth next year.
04:48So we do see a little bit of fiscal support helping the economy next year.
04:53Not a big knockout blow, but a little something.
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