00:00I would love to hear your take on the numbers we got at 830 this morning, because as we were
00:04talking about, I mean, if you're looking for some good signals here, you have the headline number alone.
00:09But then you also have the fact that, you know, it did seem like it was broadening out a little
00:13bit, the job creation in this economy.
00:15So just to start things off, what's your take?
00:20Well, anyone would have to acknowledge that this was much stronger than projected.
00:27And for me, I found the good news in it that it makes me think that chances of a recession
00:35are quite low, you know, despite the turmoil with Iran and prices and even tariffs.
00:45So I think that is all good.
00:47I think, you know, as you just raised, of course, there are some questions.
00:52Is some of this the 70,000 in hospitality jobs being driven by, you know, World Cup hiring, seasonal type
01:01of things.
01:02But, you know, one should be able to take, you know, some good news occasionally when you see it.
01:07I think the hard news is going to be how does the average worker feel, because what it also showed
01:15is relatively slow wage growth in the face of 7.2 percent inflation CPI annualized over the last three months.
01:26And take it from somebody who is in the Biden White House, you know, the painful lesson you do learn
01:32is that, you know, even strong unemployment and jobs numbers do not overcome unhappiness.
01:41If the mass number of people are feeling that 7 percent the last three months in inflation or the 6
01:48percent year over year on electricity or that feeling that they're falling behind because their wage gains are just not
01:55as much as the inflation on the prices they're spending on.
01:59Yeah, you think about average hourly earnings increasing at a 3.4 percent annualized pace, a little bit lower than
02:07the prior reading and pretty much at three tenths of percent when it comes to that monthly number.
02:13And, Gene, I mean, the idea out there, if you take a look at what the bond market is pricing,
02:16is that now we have a situation where the Federal Reserve isn't looking at rate cuts anymore.
02:21Now we're pricing in a full rate hike for 2026.
02:26And you think about all of the affordability concerns percolating through this economy, the fact that you're not necessarily going
02:33to get that relief when it comes to interest rates.
02:36I mean, how does that factor in?
02:38Yeah, I mean, this is a tough situation.
02:40It's not easy to be on the Federal Reserve now.
02:43Just to add to your point, this was like the lowest real wage growth since right after the pandemic in
02:5021,
02:52which wouldn't be as bad if it wasn't, you know, essentially coming in a period where you had such high
02:59inflation.
03:00So, yes, people are feeling the squeeze.
03:03Their wages are not keeping up with prices.
03:07Now, you know, for me, as I said, you might have seen the stock market rally in the sense that
03:14recession risk has been reduced.
03:17But as you said, it's not actually a good day in the markets because people are now anticipating a higher
03:24chance of a rate increase.
03:27I personally am not projecting that.
03:30And I don't think I'd be for it.
03:32I think that it makes a lot of sense just to hold just for the reasons you've said.
03:37And, yes, it's a strong job market.
03:39But, you know, we've only averaged about 50,000 since January 2025.
03:46We're a little over 100,000 for 2026.
03:50I think it's showing it's solid.
03:52I think if I were on the Federal Reserve, I would be for holding, not either get rid of the
03:59president's idea of cutting more.
04:00But I also think, you know, Kevin Moore is just going to try to get a consensus on holding rates
04:06where they are.
04:07Well, good luck to him.
04:08I am curious outside of the monetary policy circles, Gene.
04:11And I do want to go back to this idea of how people feel about the economy.
04:15I know as academics, as market participants, et cetera, economists, we can sort of look at these numbers and understand
04:21that, yes, they are strong.
04:23I also look at that wage growth number that you talked about, which, of course, is now undershooting headline inflation
04:29growth.
04:29And we get another CPI report tomorrow that's going to show that gap widening even further.
04:33What is the potential policy response?
04:37And I mean this more on the from the White House and the Treasury, et cetera, rather than the Fed
04:41that can address what I think a lot of people on the ground from low income to middle income have
04:47basically been saying now for months, which is that they don't feel like this is a strong economy.
04:54Yeah, I mean, as I said, you know, what we've really learned after the last four or five years is
04:59some of the traditional indicators that like unemployment and job growth.
05:05It's not that they're not important, they are.
05:08But if people, you know, are feeling prices are high, their wages aren't keeping up, you know, that affects everybody,
05:16not just the people on the margins fighting for jobs.
05:20That affects everybody.
05:21I mean, it was shocking to see the Michigan consumer sentiment be the lowest, you know, on record in 70
05:27years.
05:28I mean, lower than 9-11, lower than the pandemic, lower than the great, great financial crisis.
05:34So, you know, I guess where I would be a little offer critic, you know, some constructive criticism to this
05:41White House is that, you know, there's some things you really can't avoid.
05:46You know, President Biden, you know, and President Trump before him, they inherited the, you know, a pandemic.
05:52And you can argue whether President Biden, you know, put too much into the economy or put just the right
05:58amount in.
05:58But here you really have these things like tariffs and the war in the military conflict in Iran that are
06:07unquestionably affecting prices.
06:10So unlike other situations where, geez, there's nothing the president could really do about gas prices, about inflation, you do
06:18have options.
06:20And one of them is to work harder to resolve things in Iran.
06:27And, you know, if I'd been there long ago, I would have said management of the Straits of Hormuz is
06:33the number one issue.
06:34Don't even start the military conflict until you have it figured out.
06:37And let's get out relatively quick.
06:40And so that's still an option that would make things better.
06:44And you've seen them start to pull back on some of the tariffs related to farm equipment.
06:50So there. So this is a White House that has some tools to do something in terms of tariff and
06:56the military conflict.
06:58And I think there's a whole lot of Republicans running for reelection right now that would like the White House
07:04to start using some of those tools.
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