00:00Yeah, so obviously we all have to pay attention to this speech because at times it has been used to
00:05give some pretty important policy hints, but more often than not, it's used to address some of the bigger questions
00:12out there.
00:12And while I think there has been some pushback about Chair Warsh's communication so far, he's a less is more
00:19guy when it comes to laying out his reaction function.
00:23And we're still only three months in, so I don't think he's going to abandon that strategy.
00:27And I think if anything, it'll probably be used to lay out some more of what the task forces are
00:34trying to solve for, maybe what some of the potential options are around size and composition of balance sheet, how
00:40they use the SEP, but they're not going to commit to anything.
00:44But I think ultimately it's going to be used to buy some time until those task forces are complete with
00:50their findings.
00:51Sarah, I think one of the task forces that a lot of folks are really focusing on is kind of
00:55what data might the Fed look at that's maybe something different than what they've done in the past.
01:02What do you expect to hear on that front?
01:04Yeah, so I think we'll hear more in terms of the different alternative data sources.
01:09So particularly when it comes to the labor market, there's a lot of other options for the Fed to look
01:14at in addition to the monthly employment report, some of the other BLS data like the jobs opening and labor
01:21turnover survey.
01:22But I think ultimately, even as I think the Fed is going to try to leverage some of these alternative
01:28data sources that do leverage the big data that we have so much access to now in the economy, it
01:34would really be more about how those data sources are going to complement the government data, which still remains the
01:40gold standard.
01:41I think for all the different issues it's had in terms of survey responses, funding, et cetera, it's the one
01:47thing that's designed to really mimic the broader economy.
01:51So I would expect a task force like that.
01:53It will highlight a lot of the other options available, but it all comes down to what do they say
01:57together in concert?
01:58You can't just switch from just going from some of the government data to these alternative sources, but it's all
02:05about what do they say together and leveraging that additional information.
02:09Sarah, we've had now four or five days to kind of digest Treasury Secretary Besant and his bond buying efforts
02:17last week.
02:18How do you guys at Wells Fargo think about that going forward?
02:21Yeah, so I think, I mean, in some ways this is just a short term play to help bring those
02:26longer end yields down.
02:28And it's not going to address what we think is the underlying issue, which is really these unsustainable fiscal deficits.
02:36So, yes, there's been other factors at play, like increased competition from corporate borrowers, additional uncertainty around the geopolitical backdrop,
02:45inflation, how the Fed's going to handle that.
02:48But so much of this comes down to that we have 6% deficits at a time of full employment
02:53with, I think, neither party willing to address that.
02:57And so I think this doesn't get away from that, you know, this isn't going to bring rates sustainably lower.
03:04Sarah, I was thinking about this this weekend with all the hysteria Thursday, Friday, and we're living it right now,
03:09folks.
03:09Futures negative 20, the VIX 16 again.
03:12You know, it's not like a VIX of 30, but there's a lot of emotion out there.
03:17Sarah, what's the likelihood?
03:19And Wells Fargo is really good at this.
03:21What's the likelihood that instead of some drama, we just keep moving forward with this successful American economy?
03:33Yeah, I mean, I think that's what we've been seeing these past few years.
03:36You've thrown so much at the U.S. economy, everything from that aggressive Fed hiking cycle to some of the
03:42biggest changes in trade policy that we've seen in decades.
03:48You've had some questions around fiscal.
03:51We've had now higher gas prices back above $4.
03:55But as we've seen all these different challenges thrown at the U.S. economy, the consumer continues to spend.
04:01And, of course, we've also had this very positive secular shock coming from the AI investment.
04:08So our expectation is that we continue to see pretty decent growth through the back half of the year.
04:13So somewhere a little over 2%, maybe consumer not quite as strong.
04:18But that business investment is still booing overall growth and also lending some indirect support through the consumer that offsets
04:26some of those challenges like higher gas prices, the fading boost from tax refunds, for example.
04:31Like, Paul, I'm thinking about this.
04:33Like, what are the outcomes here out of Jackson Hole?
04:35And, you know, Purcelli and the House play it down at Wells Fargo.
04:39But to me, the basic idea is the juggernaut just keeps going.
04:43I mean, Europe looks at AI and says, we've got to play, et cetera.
04:47Yeah, that's interesting.
04:48So, I mean, Sarah, to that end of the economy just keep chugging along, talk to us about the labor
04:53market.
04:54How strong is it?
04:55Or should we be concerned that there may not be as strong as we think it is?
04:58How do you guys view that?
05:00Yeah, so I'd say overall the labor market's stable, but I wouldn't say it's as strong as certainly I think
05:06what the drop in the unemployment rate this year would imply in terms of that pointing to at least some
05:12modest tightening.
05:13We just don't see that.
05:14I think when you step back and look at, okay, the unemployment rate is down a couple tenths since the
05:18start of the year.
05:19Well, the participation rate's down seven tenths.
05:22And so this isn't nearly as strong as first meets the eye.
05:25You saw some weakness in payrolls there with the July report, still looking a little bit better year to date.
05:31But I think when you still scratch underneath the surface, hiring still remains very, very narrow, still a very low
05:39turnover environment because there just aren't a lot of job opportunities out there.
05:42And so it's fine if you have a job right now.
05:46You're at low risk of losing that.
05:47And that's been another support, I think, to consumer spending.
05:50But it's very different for us.
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