August 25, 2025 • 28 mins
According to Richmond Federal Reserve Bank President Tom Barkin, much of the time central banking is straightforward. Sometimes it's clear that rate cuts are needed. Sometimes it's clear that rate hikes are needed. Other times everything is going great, and central bankers don't have much to worry about. Right now though, things are not straightforward. There are signs of labor market softening. But also there are reasons to be concerned that inflation pressure is building yet again. In times like this, the playbook is less obvious. On this episode, recorded at the Jackson Hole Economic
Symposium, Barkin walks us through how he's thinking about the economy right now.
More: Fed’s Jackson Hole Points to a Hard Road Ahead for Powell
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Why isn't thal Joe.
Speaker 2 (00:23):
We're still at Jackson Hole. Yes, by the time this
episode comes out, the dust will have settled. That's the
entire event, and we will have gotten well. We already
had the speech from FED chair Jerome pow Right, and
this afternoon as we're recording, we're seeing market surging. Everyone,
it seems, has interpreted this as pretty dubbish.
Speaker 3 (00:46):
Yeah, that's right, and along a Bloomberg had an interesting
piece if it wasn't as dubvish as people think, but
it felt duvish in the context of, you know, a
recent chat with us in Goolsby. Recent he was concerned
about he's starting to look at that inflation date a
little bit more fell division the context of our recent
episode with Kansas City Fed President Jeffrey Schmid, he too
(01:08):
was talking about, how, you know, things are maybe still
looking a little warmon could.
Speaker 2 (01:12):
Be talking about if you look at the Taylor rule,
you know, you could argue maybe rates should be a
little higher.
Speaker 3 (01:17):
Anyway, I think we should continue on our survey of
as many FED presidents as we can.
Speaker 2 (01:22):
All right, well, we do have the perfect guests. On
that note, a friend of the pod, Richmond FED President
Tom Barkin. Welcome back. It's good to see you.
Speaker 4 (01:29):
Yeah, good to see you guys too.
Speaker 2 (01:31):
Thanks so much for doing this, taking time out of
your you know, hiking and conferencing schedule, so we appreciate it.
Why don't we just start with the obvious question, which
is I guess you talked earlier this week that the
balance between employment risks and inflation risks is really unclear
at the moment. Pal seemed to air on the side
(01:52):
of the labor market, right, he kind of chose to
prioritize that. Do you think that's the right move?
Speaker 4 (01:58):
Well, as you said, I've been saying, I'm confused about everything.
I'm confused about labor market and the inflation side, and
I think there's lots of people who come up with
different views of how to weigh the risks. Here's the
interesting thing. We've been hearing from businesses for a year
and a half that they haven't been hiring. We've been
seeing in the number that they haven't been hiring. They
(02:19):
also haven't been laying people off. And when we get
into the job's numbers that kept coming in at one
hundred and thirty thousand a month or one hundred and
twenty thousand a month, that seems strange, but it was
good news. I mean, there's nothing wrong with a lot
of jobs. And so what we saw last month was
a different jobs report with a job's revision that now
sort of says, hey, we're growing at thirty five thousand
jobs a month. That actually makes a little more intuitive
(02:41):
sense to me given what I'm hearing in the marketplace.
If you're not hiring, then where the new hires coming from.
And by the way, we'll get a revision a QCW
in September that probably will take those numbers down again.
And so if you're dealing with one hundred and thirty
thousand job market, that's a very different level of confidence
than if you're dealing with a thirty five thousand or
even maybe even a zero job growth market. And I
(03:03):
think that's where the concern comes from. What holds you
back from being overly concerned is the unemployment rate, which
still is at four point two percent, perfectly really good
unemployment rate. You know, at any time in any cycle,
and so you know, how much how lucky do you feel,
Deale feel? Did you feel in the jobs growth? How
much do you feel in the unemployment rate? The gap
between the two obviously is driven by we're not having
(03:25):
net migration, you know, into the country the way that
we used to. You could call that two million a year.
My generation, the baby boomer baby boomers are aging out
of the workforce. I'm not aging, nor am I out
of the workforce, but my generation is. And that's maybe
a million three people sixty five and older increase out
of the workforce over the last three years per year.
And then you know, this temporary protected status thing takes
(03:47):
some more people out of the workforce. And so it's
possible that you know, we're seeing your job growth and
that's going to keep the unemployment rate steady. But you know,
there's nothing wrong with being nervous about that. I think
you also have to be us on the inflation side,
and we weren't at two percent before all the tariff talk.
All the tariff stuff's coming in. It's not hitting inflation
nearly as much as some people thought, but people are
(04:09):
still passing it on. You would have seen Walmart's earning
support yesterday where they talked about it, or home Depot
or you know, people are talking about No.
Speaker 2 (04:16):
Walmart basically said it's coming.
Speaker 4 (04:17):
It's coming now. It doesn't have to be as severe
as you know people like to think. And we can
talk about that if you want, but it's coming. So
I like to say my tearo policy is really easy.
Three quarters of the time. You know, when inflation's high
and unemployment's low, raise rates, and when you have the
opposite situation, lower rates. And you know, if inflation's low
and unemployment's slow, you can spend a few more days
(04:39):
at Jackson Hole. But if you're going to have risk
on the inflation side and risk on the employment side,
that's what it gets hard.
Speaker 3 (04:45):
Talk to us about your interpretation of Powell speech, because
it does seem like actually there is no consensus on
how quote Dovish it was the market surged. But when
you heard it or when you read it, I don't
know when you saw it. Whenever you when it, maybe
do you get in advance, so you were you read
it at the same time as we did, Like what
was your read on it?
Speaker 4 (05:05):
So I think you guys are all incredibly talented and
much more talent than I am, but at interpreting speeches,
so uh.
Speaker 2 (05:12):
Believe it or not.
Speaker 4 (05:15):
I actually gave a speech last week and one of
the FED commentators went through my last paragraph and compared
it to my last paragraph before and said, see, Barkin
has changed in these days. And I'm like, huh, that
was really well done. I you know, I was even
sophistical commentator.
Speaker 3 (05:29):
Was correct in the way that you actually yourself hadn't
thought about.
Speaker 4 (05:33):
So so when you guys read these speeches, I mean,
the commas matter, the sentences matter.
Speaker 3 (05:40):
That's really our call for what it's worth. That's our colleagues,
y commas. But let's give it.
Speaker 4 (05:44):
Let's hear you and I And I'm sure Jay is
very sophisticated in his team, so I'm sure they're also
thinking about this. So I'm not saying people get real accidents.
But when I read it, and when I heard it,
I actually heard it live for the first time, so
I didn't read it before it came out. It seemed
like a perfectly down the middle speech to me. If
you had asked me what the markets would have and
I guess I would have imagined that they'd read it
as modestly dubbish. It seems like I read it as
(06:04):
more dubbish than I heard it. But what do I know.
I mean, I'm just listened to the speech like everybody else.
Speaker 2 (06:10):
Well, I mean this kind of begs the question. But
how could easily have just said, you know, we're data
dependent and we're going to wait for the next CPI number,
the next payrolls number. Instead he chose to really emphasize
the labor side of the dual mandate. Why why is that?
Speaker 4 (06:27):
I mean you'd have to ask, you know, when he
comes on the show.
Speaker 2 (06:30):
Ye, I know you'll have a lot of questions, tell
him he should come on the show.
Speaker 4 (06:33):
I will say one thing that's odd about Jackson Hole
every year is it's the period worry of the longest
break between meeting right right and this time, not only
do we have a long break between meetings, but you know,
the day after or two days after his press conference,
we got these big revisions on the job report. So
I don't know, maybe you could imagine there was a
trying to mark to market the from the press conference
to hear I don't know. I mean, it's a he
(06:55):
knows what he does.
Speaker 3 (06:56):
Something that came up in our conversation with Jeff Schmid
was they said that, and I'm curious how there's sort
of jobs with what you've been hearing from businesses. You know,
when we talked to Mary Daily and Alaska a few
weeks ago, she said, you know, the revisions made sense
to me. Actually, look what you're saying, because actually this
is fitting with the anecdotal commentary that I've been hearing,
(07:18):
and intuitively, right post Liberation Day, lots of anxiety, uncertainty,
it makes sense there'd be a hiring slowdown. However, something
that Casey Fed President Schmid said was, yes, it fits,
but well, the uncertainty is easing now. Tariffs are not
as uncertain as they were in the middle of April
by any stretch. Even though there's new headlines almost every day.
(07:39):
There's nowhere near as much uncertainty. And then maybe that
was the cycle low for the year, that sort of
April May June July period. Does that seem plausible to
you based on what you're seeing out there.
Speaker 4 (07:51):
Yeah, So I've been describing that as driving in the fog,
and you know, I've been saying that when you're driving
in the fog, it's hard to put your foot on
the breath on the gas because you don't know what's
around the next curve. And you don't want to put
your foot in the brakes either because you don't know
what someone behind you is going to run into you,
so you pull over and put on the hazards. That's
a money analogy I've been using for a few months.
(08:11):
But but what I've been saying, you know, the last
month is I think the fog is lifting, and I
do think we've got you know what's happening on the
immigration side, you know what's happening on the deregulation side,
different sectors in different you have different points of view
on that. We have a tax bill, so you know
what that looks like, and people have a you know
at least what the boundaries look like on tarifts. Now.
I don't think they're ever going to be once set
(08:33):
done and will know the rules for forever. I think
it's a tool that is going to surface again and again.
But I think people sort of know what that is.
And so when I'm talking to businesses, it feels like
it's shifting now that you know, I'm going to now
torture the analogy because they think the road's bumpy, right,
and so I still hear a lot of not hiring,
not firing. I'm going to, you know, be a little
(08:53):
cautious with my costs. I'm going to do it through attrition,
not through layoffs. I still hear that. I've heard a
few stories of leaning into investing, particularly supported by some
of the depreciation stuff. You know, I've been waiting for
this tax heading to pass. That have sertainty, but I
wouldn't say not at scale, you know, modest amounts of it.
The one place where you might be seeing this sentiment
(09:13):
change is on the consumer side, and I've been hearing
from the retailers I'm talking to and from the manufacturers
I've talked to, of a lift in consumer spending starting
in you know, end of June into July. If you
look at the credit card data, you'll see a big
increase in July, which is continued the first two weeks
of August. It would make sense that a bunch of
consumers who by the way, still have jobs, real wages
(09:36):
are still up as inflation comes down, and the markets
are obviously healthy, both asset valuations and houses or stock
market all very healthy, that they might have taken a
step back in the context of all the news in
April and May, and maybe now they're coming back in
so that that's the one place I'm starting to see.
I'm moving. I'm very attentive. You know, we'll get the
(09:56):
PC next week, very temped to what we're seeing. But
you could imagine, you know, temporary air pocket is consumers
sort of pulled back, worried, and you see this in
the consumer sentiment data, that inflation was going to hit
huge numbers and all of a sudden, you know, people
are going to be unemployed and they were going to
have issues. Now they're not seeing it. It's possible.
Speaker 2 (10:13):
Do you think that we're maybe getting a bit of
a reacceleration in the economy at this point, because you
look at retail sales they were very strong, as you
point out, You look at the city Economic Surprise Index
that's been ticking up, some of the regional surveys are
starting to improve a little bit. Do you see that
reacceleration impetus?
Speaker 4 (10:30):
You know, it's possible. Like I said, I sort of
see the energy on the consumer side. We'll see how
long it lasts, you know, I think you can call
a reacceleration when you get there. I definitely am not
talking to businesses who are talking about blowing out earnings.
I don't. I don't hear one of those kind of accelerations.
So I don't hear frothiness yet. But I am hearing
some very positive vibes on the consumer spending side, which
(10:51):
I'm pleased to hear.
Speaker 3 (10:52):
If inflation is warm, and maybe if there's upside risks
still to inflation, why could there be more to it
than just yeah, terriff, sorry, maybe, but like, could there
be something more going on? And perhaps that consumer strength
pretty large deficit still even with the revenue that's coming
in from tariffs. Maybe someone like the it's been I
(11:14):
don't know, what do you think is the story on inflation?
How much is tariffs and how much is other stuff?
Speaker 4 (11:18):
Well, so I just think it takes a long time
to get inflation back to two percent. If you go
back and look at the Vulgar years, and of course
he did stuff to the economy that was much more
aggressive than what we did, and he of course he
had inflation that was much more ingrained and didn't have
an inflation target, but he took rates up a lot
inflation came down a lot, but it didn't get to
two percent. It was four, oh yeah, And you know,
(11:39):
it sort of eked its way down from four to
three and a half to three to two.
Speaker 3 (11:43):
And a half, and then throughout the eighties and nineties exactly.
Speaker 4 (11:45):
For twenty years until it sort of hit two and
sort of starts sticking around too. So I give you
that just for perspective, and you know, again from my experience,
I'll tell you why that happens, which is people don't
just immediately go back to the old number. You've got
some amount of care to do wages and prices people
who didn't raise it. People's expectations, I think are very
significantly triggered by actual inflation. And so my old job,
(12:09):
we had to raise prices every year, and we sort
of thought about it, and a lot of times we
raise price based on last year's inflation, and so it
just there's some stickiness to it. And so what we've
seen is very encouraging on the inflation numbers. They've gone
from you know, seven at their peak down to you know,
somewhere in the high twos. Maybe it'll tick up to
the three now. And so I think that's one piece
of it. Actual just take it's sticky. It takes a while.
(12:31):
And then the second piece of it is, I do
think you've got this tariff concern in there, and that
people are passing on costs, and then people who don't
even have the costs are using this as a cover
to pass on costs.
Speaker 3 (12:41):
So just real quickly. Then, if there's all these factors,
et cetera, why is there conversation about cutting rates, Or
if there is conversation about cutting rates, how seriously should
the should people be take those two percent commitment?
Speaker 4 (12:54):
Well, so there's calibration going on. So you've got unemployment
that's low but maybe training. You've got inflation that's been
coming down and maybe ticked up but maybe for one
time reason. And you've got a neutral rate that is
by all accounts lower than where we are, but lots
of debate about is it just a little bit lower
or is it significantly lower? And so I think those
three things go together, and people just ask it, do
(13:16):
you recalibrate to a different number in the context of this,
or are we well positioned where we are?
Speaker 2 (13:22):
This discussion actually reminds me, what's your story for why
inflation did come down in the post pandemic period. Is
it the sort of immaculate disinflation explanation where the supply
chain pressure has just started dissipating, or did the Fed's
actions actually have a kind of sledgehammer effect here.
Speaker 4 (13:41):
I think it's in all of the above. I mean,
if the FED doesn't act when people expect us to act,
then I think that sort of unwinds expectations the way.
That's not very helpful. On the other hand, you can't
ignore that a lot of the supply constraints that we're
driving prices up, commodity prices, ships backed up in harbor's chips,
no in cars, people not at work. Those things also amilorated.
(14:02):
We also had a really big immigration number for about
two years. That meant, you know, the supply side jobs
got filled a lot faster. It definitely released the pressure
and a lot of things so supply help. Hopefully, the
FED did its part and the combination of things brought
it down.
Speaker 3 (14:34):
When we were in Alaska, we learned that there is
a major furniture expo every year in your district in
North Carolina. Also North Carolina. It's like, I think if
people think of like regions that have lost from trade
or regions that got hit really hard by free trade.
I'm not even sure if it's true, but certainly that
is the perception. It's actually it's your district.
Speaker 2 (14:55):
Well, this is one thing we learned by traveling with
Tom and going on some of his trips to talk
to local businesses. There is a sense that manufacturing in
North Carolina has been hollowed out.
Speaker 3 (15:05):
Absolutely, it's a very short sense. But there's also cities
in North Carolina that are some of the most dynamic
in the entire country, especially over the last couple of decades.
But I'm just curious right now, like tariffs in your district,
what are you saying.
Speaker 4 (15:17):
So, no question, Historically, the textile industries, the furniture industries
got hit very hard. If you look at the Carolinas though,
and you took it the last twenty five years, you'd
say there's also been a lot of foreign based manufacturers
that have put manufacturing sites. I'm thinking of Greenville, South Carolina,
Spartanburg where I was last week, where you've got BMW
and big auto manufacturers you know, and their whole supply
(15:38):
chains coming into town. You know what we hear, right
now is it's very different by sector you're in, and
it's very different by your position in that sector. So
there are a lot of people who manufacture in South
and South and North Carolina, but they source abroad and
they're very worried about their costs. Think of the big
auto manufacturers. There's a lot of people who manufacture in
(15:59):
North Carolina and they're one hundred percent American made, and
they think this is the greatest thing in the world
because they'll get protection for their sectors. Or the people
on the other side who've been you know, putting low costs,
they're going to get So it's very very dependent.
Speaker 2 (16:10):
On where you say, well, speaking of you know, specific
sectors potentially benefiting. There are loads of tariff headlines still
coming in, but one of them that caught my eye
was Trump saying that he was going to start a
furniture tariff investigation with a view to setting tariffs on
furniture imports into the US, specifically to help North Carolina.
(16:32):
What's your immediate reaction when you see a headline like that.
Speaker 4 (16:35):
Well, we've been seeing a lot of headlines, you know, Yeah,
I know on the tariffs thing. So first thing I
downed is I tried not to serve headlines too much.
We'll see what tariffs get applied on what industries, with
what duration and what products, and that's what a lot
of the manufacturers I talked to also do. I'm sure
the people who manufacture furniture and North Calina would be
very supportive. There aren't actually all that many. A lot
(16:57):
of jobs have been lost, and I think if people
start to consider bringing jobs back, the thing you hear about,
you know, over and over and over again, is just
availability of workforce and the cost of workforce. You know,
the jobs that I think are most likely to come
back are ones that are the least dependent on workforce,
or have the highest skilled workforce, or have high paid workforce.
(17:19):
And a lot of these jobs have gone to place
with very low cost workforces. And I don't know the
level of tariff that one would need to get to to,
you know, bring those jobs back, but it's a pretty
significant number. The other thing that's really not talked about
much that I just think is interesting. I was in Hickory,
which is a factory town. I talked to a lot
of furniture manufacturers there, and they're looking for workers. This
(17:39):
is during the COVID and they were, you know, having
a very strong demand cycle. But I went to community college.
I talked to a bunch of workers there and I said, well,
you guys trained to get in the furniture industry, and
several of them told me, you know, my dad was
in there and got laid off, and so we're not
going there. You know, the thought that people are waiting
to go back into the jobs to build the matters
(18:00):
a lot too. And so as we bring jobs back
in the country, which would be great, and I hope
we do, making sure there's stable jobs and their jobs
that are going to be around for a generation is
very important, I think in terms of getting workers into
the jobs.
Speaker 3 (18:11):
We are recording this today that Chairman Powell gave his
final speech as FED chair at Jackson Hole. It was
a policy speech and he did not talk about FED
independence and the attacks on FED independence that are coming
from the White House and so forth, the political pressure
that the FED has been coming under. When you think
about inflation, maybe not in the short term, maybe not
(18:34):
you know, the latest PPI reading or whatever, but when
you think about like the long term, like the ability
of the FED to maintain that two percent inflation. Do
you think about, like, well, will the US political system
have the sort of stomach to preserve a FED as
an independent agentic force in the economy.
Speaker 4 (18:54):
Well, so we've all relearned something in the last five
years that we didn't know we need to relearn, which
was how much we hate inflation. And inflation, you know,
it feels unfair. You get a raise and then you know,
the money gets spent somewhere else. It creates uncertainty, and frankly,
it's just exhausting. It's exhausting to deal with people who
are trying to raise your prices or to shop around
for better prices, or deal with you know, vendors. And so,
(19:18):
if there's one thing I think the American people have
aligned on over the last five years, it's just how
much we hate inflation. And you know, there's been a
lot of work done in a lot of countries in
terms of what's the best way to get inflation on control?
And an independent central bank is the answer to that question.
The research is very powerful.
Speaker 3 (19:33):
Do you worry that like the that the that over
the medium term, that the sort of political system that
has allowed for an entity like the FED to exist
and operate outside of the electoral cycle is understressed.
Speaker 4 (19:46):
I hope and I expect that this country is going
to recognize that independent central bank is the best way
to get into control the thing which we hate the most.
Speaker 2 (19:53):
Just on the people hate inflation point, which I think
is a very salient idea. You've been very vocal on
the idea of like companies having learned the inflation playbook, right,
like they tested price elasticity during the last round of
high inflation, and you know, maybe maybe there's more of
(20:14):
an impulse this time around to raise prices to offset
either higher input costs or higher tariff costs. Are you
still sort of on the inflationary impulse side. Do you
think that residual experience still matters.
Speaker 4 (20:27):
I definitely think the residual experience matters. When I talk
to companies about the tariffs that hit them. The first
thing here is going to pass it on to my customers.
But I also think this residual experience matters on the
customer side. I guess I just remind everybody that this
isn't twenty twenty two. In twenty twenty two, a bunch
of supply costs hit a bunch of companies that passed
it on and the people who received them. You and
(20:49):
I we hadn't spent money for a year and a
half with COVID, We'd gotten stimulus payments, our assets were
quite frothy and highly valued. We were ready for revenge
spending spent. And that's twenty twenty two. We're not in
twenty twenty two, when, by the way, we also had
accommodateive monetary policy. We're in twenty twenty five. Here we
have restrictive monetary policy. And in addition, you have consumers
(21:10):
who are already trading down. And so I've said earlier,
they've got money, but they're not dying to spend it.
And what you hear is normal price retailer to value, retailer,
beef to chicken, vacationist staycation, that's what you're hearing. And
people in private label is growing, and so I think
those customers are not going to accept those price increases
the same way they have. And it's sort of Milton
(21:31):
friedmany a little bit. If there's not more money in
the system, how are you going to get inflation? And
you could argue there's some money in the system and
you'll get some inflation. I believe that, but I don't
think you're going to get anywhere near the kind of
stuff that people imagine, because this company that's now learned
how to pass on prices is going to meet a
consumer who's ready to resist it.
Speaker 2 (21:50):
You mentioned restrictiveness just then, and this is something that
Pal also said in the speech today. He said, you know,
rates are still restrictive, I think he said, albeit modestly so.
But when I look at stocks at all time highs
and credit spreads, you know, basically thirty year lows financial conditions,
things don't seem all that restrictive. If you look specifically
(22:12):
at the market. How is the FED sort of coming
to the conclusion about the relation of benchmark rates here
or the.
Speaker 4 (22:19):
Character As you can tell from the SEP. Different people
have different models. Of course, the model that we use
in Richmond, you know, has a lot to do with
the impact of rates on the economy, and so you know,
you can see what rates are and you can lag
it and look at you later and see what the
impact is. One thing I like to look at is
nominal consumption. Nominal consumption was quite elevated during the pandemic.
(22:40):
We raised rates and it came down still at a
decent level. It's been sort of five and a half
percent until the last couple of months, but it sort
of seems to have come off that in the last
month of two. We'll see what the more recent data is.
But that nominal consumption is a great way to look
at it because it just says what's happening rates to
what people are doing in the economy. I do agree
there are lots of other factors that affect dynamis in
(23:00):
the economy, and if the market's frothy, a thing we
don't control, that's also part of it. But in the
part we control, I think you can see it by
its works.
Speaker 3 (23:07):
I think I just have one more question for you,
And I just feel like, maybe because you talk to
businesses so much, maybe you have some fresh insight on this.
Do you hear much about electricity prices in your conversations
these days? Because I feel like there's starting to be
in the news and the strain on the grid, and
but for whatever reason, how is that you're hearing much
about that?
Speaker 4 (23:26):
A lot of concern about electricity availability? Okay, you know,
are we going to have an electricity to power all
the AI and all the data centers are going up.
You know there are states, you know, Virginia's one where
data centers are quite right, and so you do hear
a little bit of public concern about what's this all
going to mean? But just a reminder that electricity prices
tend to lag significantly. They got to go through rate processes.
(23:48):
Every state is different, and so you know, I'm not
sure that's hitting the consumer public. I do hear lots
of I'll just call it local infrastructure funding HOSS being
passed on to consumers and consumers making trade offs in
that context. So you know, there was a big water
increase in the town I was in in Maryland a
month ago, and a lot of conversations about people not
(24:09):
paying their water bill. Because so you do hear it
more broadly, but I wouldn't say that the price is
yet hit.
Speaker 2 (24:15):
Okay, So I'm going to ask a sort of on
the ground color question. But when you think about this
Jackson Hole and you think about maybe last year is
Jackson Hole in twenty twenty four, can you compare and
contrast the vibes? How are they different?
Speaker 4 (24:28):
This is my eighth one. Two of them were virtual.
They're not nearly as good when they're virtual no fish,
it's a nice picture.
Speaker 1 (24:37):
I'd say.
Speaker 4 (24:37):
In general, the vibe is pretty much the same every time.
I mean, I really like them because there's a they
turn over the population a little, you know, and so
they are new.
Speaker 2 (24:48):
There's new guests every time.
Speaker 4 (24:49):
The academics, I haven't met new leaders. I haven't met,
so that's kind of fun for me, and I get that,
but I'm not sure the vibe changes all that much.
It's a it's a real privilege to be invited to
like this, and I enjoy it. I don't spend a
lot of time thinking about the vibe. The vibes exactly all.
Speaker 2 (25:06):
Right, Tom Barkin, thank you so much for coming back
on all thoughts.
Speaker 4 (25:09):
Really appreciate it, and I always appreciate being with you things.
Speaker 3 (25:11):
Thank you so much.
Speaker 2 (25:25):
Joe. You know, I have some furniture from North Carolina.
It's really good quality.
Speaker 3 (25:30):
Maybe maybe in North Carolina, just imported through the port
or the shows.
Speaker 2 (25:35):
No, actually made in North Carolina. And I know that
because it's vintage, so it was probably back when the
furniture industry was a little bit bigger there.
Speaker 3 (25:42):
I do think like did North Carolina. I mean, it's
a long standing debate. Some of the biggest boom cities
of the twenty and twenty tens were like you know,
Durham and all those places, et cetera. You know, it's
still like going back to Charlotte. Charlotte was huge booms,
all the bank stuff there. Like you think about the
last twenty five years, this is the area that we
(26:03):
think is like most quote hollowed out, etc. It's also
like one of the fastest growing. Here is the whole
is it complete? Even the past is complicated. Hindsight is
not twenty twenty.
Speaker 2 (26:12):
Yeah, and I think complication is sort of Complication and
uncertainty are the big buzzwords of this conference. Clearly, like
we hear it over and over again that there are
risks on both the employment side of the mandate and
the price side of the mandate, and central bankers basically
have to make like a tough choice over which one
they're going to concentrate on. I did think it was
interesting that Tom mentioned that he read Pal's speech is
(26:36):
more down the middle than perhaps the market did. No.
Speaker 3 (26:39):
I thought that was interesting too. I like the fog
analogy that you actually don't want to break too much
of the fawity fog either because the car behind you
might not react in time. That that was really good.
I also liked the part about how three quarters of
the time vigg as central banker is really easy because
either you hike or you cut or you go on
a hike in Wildman the at the fourth time, like
(27:01):
the fear of stagflation, Yeah, right, that's what that's what
that forth. So here's like, this is that fourth time? Now,
how persistent will it be with it? But the basic
like what we're talking about in all these conversations, what
we're talking about is this building anxiety about stagflation.
Speaker 2 (27:16):
It's stagflation combined with really difficult to predict timelines for
exactly when it materializes. Right, Like that also seems to
be a complicating factor. Okay, well on that note, shall
we leave it there.
Speaker 3 (27:28):
Let's leave it there.
Speaker 2 (27:29):
This has been another episode of the aud Lots podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway
and I'm Jill Wassenthal.
Speaker 3 (27:36):
You can follow me at the Stalwart. Follow our producers
Kerman Rodriguez at Carman armand Dashel Bennett at Dashbot and
Kilbrooks and Kilbrooks For more Odd Lots content, go to
Bloomberg dot com slash odd Lots or of the daily
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Speaker 2 (27:55):
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Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Why isn't thal Joe.
Speaker 2 (00:23):
We're still at Jackson Hole. Yes, by the time this
episode comes out, the dust will have settled. That's the
entire event, and we will have gotten well. We already
had the speech from FED chair Jerome pow Right, and
this afternoon as we're recording, we're seeing market surging. Everyone,
it seems, has interpreted this as pretty dubbish.
Speaker 3 (00:46):
Yeah, that's right, and along a Bloomberg had an interesting
piece if it wasn't as dubvish as people think, but
it felt duvish in the context of, you know, a
recent chat with us in Goolsby. Recent he was concerned
about he's starting to look at that inflation date a
little bit more fell division the context of our recent
episode with Kansas City Fed President Jeffrey Schmid, he too
(01:08):
was talking about, how, you know, things are maybe still
looking a little warmon could.
Speaker 2 (01:12):
Be talking about if you look at the Taylor rule,
you know, you could argue maybe rates should be a
little higher.
Speaker 3 (01:17):
Anyway, I think we should continue on our survey of
as many FED presidents as we can.
Speaker 2 (01:22):
All right, well, we do have the perfect guests. On
that note, a friend of the pod, Richmond FED President
Tom Barkin. Welcome back. It's good to see you.
Speaker 4 (01:29):
Yeah, good to see you guys too.
Speaker 2 (01:31):
Thanks so much for doing this, taking time out of
your you know, hiking and conferencing schedule, so we appreciate it.
Why don't we just start with the obvious question, which
is I guess you talked earlier this week that the
balance between employment risks and inflation risks is really unclear
at the moment. Pal seemed to air on the side
(01:52):
of the labor market, right, he kind of chose to
prioritize that. Do you think that's the right move?
Speaker 4 (01:58):
Well, as you said, I've been saying, I'm confused about everything.
I'm confused about labor market and the inflation side, and
I think there's lots of people who come up with
different views of how to weigh the risks. Here's the
interesting thing. We've been hearing from businesses for a year
and a half that they haven't been hiring. We've been
seeing in the number that they haven't been hiring. They
(02:19):
also haven't been laying people off. And when we get
into the job's numbers that kept coming in at one
hundred and thirty thousand a month or one hundred and
twenty thousand a month, that seems strange, but it was
good news. I mean, there's nothing wrong with a lot
of jobs. And so what we saw last month was
a different jobs report with a job's revision that now
sort of says, hey, we're growing at thirty five thousand
jobs a month. That actually makes a little more intuitive
(02:41):
sense to me given what I'm hearing in the marketplace.
If you're not hiring, then where the new hires coming from.
And by the way, we'll get a revision a QCW
in September that probably will take those numbers down again.
And so if you're dealing with one hundred and thirty
thousand job market, that's a very different level of confidence
than if you're dealing with a thirty five thousand or
even maybe even a zero job growth market. And I
(03:03):
think that's where the concern comes from. What holds you
back from being overly concerned is the unemployment rate, which
still is at four point two percent, perfectly really good
unemployment rate. You know, at any time in any cycle,
and so you know, how much how lucky do you feel,
Deale feel? Did you feel in the jobs growth? How
much do you feel in the unemployment rate? The gap
between the two obviously is driven by we're not having
(03:25):
net migration, you know, into the country the way that
we used to. You could call that two million a year.
My generation, the baby boomer baby boomers are aging out
of the workforce. I'm not aging, nor am I out
of the workforce, but my generation is. And that's maybe
a million three people sixty five and older increase out
of the workforce over the last three years per year.
And then you know, this temporary protected status thing takes
(03:47):
some more people out of the workforce. And so it's
possible that you know, we're seeing your job growth and
that's going to keep the unemployment rate steady. But you know,
there's nothing wrong with being nervous about that. I think
you also have to be us on the inflation side,
and we weren't at two percent before all the tariff talk.
All the tariff stuff's coming in. It's not hitting inflation
nearly as much as some people thought, but people are
(04:09):
still passing it on. You would have seen Walmart's earning
support yesterday where they talked about it, or home Depot
or you know, people are talking about No.
Speaker 2 (04:16):
Walmart basically said it's coming.
Speaker 4 (04:17):
It's coming now. It doesn't have to be as severe
as you know people like to think. And we can
talk about that if you want, but it's coming. So
I like to say my tearo policy is really easy.
Three quarters of the time. You know, when inflation's high
and unemployment's low, raise rates, and when you have the
opposite situation, lower rates. And you know, if inflation's low
and unemployment's slow, you can spend a few more days
(04:39):
at Jackson Hole. But if you're going to have risk
on the inflation side and risk on the employment side,
that's what it gets hard.
Speaker 3 (04:45):
Talk to us about your interpretation of Powell speech, because
it does seem like actually there is no consensus on
how quote Dovish it was the market surged. But when
you heard it or when you read it, I don't
know when you saw it. Whenever you when it, maybe
do you get in advance, so you were you read
it at the same time as we did, Like what
was your read on it?
Speaker 4 (05:05):
So I think you guys are all incredibly talented and
much more talent than I am, but at interpreting speeches,
so uh.
Speaker 2 (05:12):
Believe it or not.
Speaker 4 (05:15):
I actually gave a speech last week and one of
the FED commentators went through my last paragraph and compared
it to my last paragraph before and said, see, Barkin
has changed in these days. And I'm like, huh, that
was really well done. I you know, I was even
sophistical commentator.
Speaker 3 (05:29):
Was correct in the way that you actually yourself hadn't
thought about.
Speaker 4 (05:33):
So so when you guys read these speeches, I mean,
the commas matter, the sentences matter.
Speaker 3 (05:40):
That's really our call for what it's worth. That's our colleagues,
y commas. But let's give it.
Speaker 4 (05:44):
Let's hear you and I And I'm sure Jay is
very sophisticated in his team, so I'm sure they're also
thinking about this. So I'm not saying people get real accidents.
But when I read it, and when I heard it,
I actually heard it live for the first time, so
I didn't read it before it came out. It seemed
like a perfectly down the middle speech to me. If
you had asked me what the markets would have and
I guess I would have imagined that they'd read it
as modestly dubbish. It seems like I read it as
(06:04):
more dubbish than I heard it. But what do I know.
I mean, I'm just listened to the speech like everybody else.
Speaker 2 (06:10):
Well, I mean this kind of begs the question. But
how could easily have just said, you know, we're data
dependent and we're going to wait for the next CPI number,
the next payrolls number. Instead he chose to really emphasize
the labor side of the dual mandate. Why why is that?
Speaker 4 (06:27):
I mean you'd have to ask, you know, when he
comes on the show.
Speaker 2 (06:30):
Ye, I know you'll have a lot of questions, tell
him he should come on the show.
Speaker 4 (06:33):
I will say one thing that's odd about Jackson Hole
every year is it's the period worry of the longest
break between meeting right right and this time, not only
do we have a long break between meetings, but you know,
the day after or two days after his press conference,
we got these big revisions on the job report. So
I don't know, maybe you could imagine there was a
trying to mark to market the from the press conference
to hear I don't know. I mean, it's a he
(06:55):
knows what he does.
Speaker 3 (06:56):
Something that came up in our conversation with Jeff Schmid
was they said that, and I'm curious how there's sort
of jobs with what you've been hearing from businesses. You know,
when we talked to Mary Daily and Alaska a few
weeks ago, she said, you know, the revisions made sense
to me. Actually, look what you're saying, because actually this
is fitting with the anecdotal commentary that I've been hearing,
(07:18):
and intuitively, right post Liberation Day, lots of anxiety, uncertainty,
it makes sense there'd be a hiring slowdown. However, something
that Casey Fed President Schmid said was, yes, it fits,
but well, the uncertainty is easing now. Tariffs are not
as uncertain as they were in the middle of April
by any stretch. Even though there's new headlines almost every day.
(07:39):
There's nowhere near as much uncertainty. And then maybe that
was the cycle low for the year, that sort of
April May June July period. Does that seem plausible to
you based on what you're seeing out there.
Speaker 4 (07:51):
Yeah, So I've been describing that as driving in the fog,
and you know, I've been saying that when you're driving
in the fog, it's hard to put your foot on
the breath on the gas because you don't know what's
around the next curve. And you don't want to put
your foot in the brakes either because you don't know
what someone behind you is going to run into you,
so you pull over and put on the hazards. That's
a money analogy I've been using for a few months.
(08:11):
But but what I've been saying, you know, the last
month is I think the fog is lifting, and I
do think we've got you know what's happening on the
immigration side, you know what's happening on the deregulation side,
different sectors in different you have different points of view
on that. We have a tax bill, so you know
what that looks like, and people have a you know
at least what the boundaries look like on tarifts. Now.
I don't think they're ever going to be once set
(08:33):
done and will know the rules for forever. I think
it's a tool that is going to surface again and again.
But I think people sort of know what that is.
And so when I'm talking to businesses, it feels like
it's shifting now that you know, I'm going to now
torture the analogy because they think the road's bumpy, right,
and so I still hear a lot of not hiring,
not firing. I'm going to, you know, be a little
(08:53):
cautious with my costs. I'm going to do it through attrition,
not through layoffs. I still hear that. I've heard a
few stories of leaning into investing, particularly supported by some
of the depreciation stuff. You know, I've been waiting for
this tax heading to pass. That have sertainty, but I
wouldn't say not at scale, you know, modest amounts of it.
The one place where you might be seeing this sentiment
(09:13):
change is on the consumer side, and I've been hearing
from the retailers I'm talking to and from the manufacturers
I've talked to, of a lift in consumer spending starting
in you know, end of June into July. If you
look at the credit card data, you'll see a big
increase in July, which is continued the first two weeks
of August. It would make sense that a bunch of
consumers who by the way, still have jobs, real wages
(09:36):
are still up as inflation comes down, and the markets
are obviously healthy, both asset valuations and houses or stock
market all very healthy, that they might have taken a
step back in the context of all the news in
April and May, and maybe now they're coming back in
so that that's the one place I'm starting to see.
I'm moving. I'm very attentive. You know, we'll get the
(09:56):
PC next week, very temped to what we're seeing. But
you could imagine, you know, temporary air pocket is consumers
sort of pulled back, worried, and you see this in
the consumer sentiment data, that inflation was going to hit
huge numbers and all of a sudden, you know, people
are going to be unemployed and they were going to
have issues. Now they're not seeing it. It's possible.
Speaker 2 (10:13):
Do you think that we're maybe getting a bit of
a reacceleration in the economy at this point, because you
look at retail sales they were very strong, as you
point out, You look at the city Economic Surprise Index
that's been ticking up, some of the regional surveys are
starting to improve a little bit. Do you see that
reacceleration impetus?
Speaker 4 (10:30):
You know, it's possible. Like I said, I sort of
see the energy on the consumer side. We'll see how
long it lasts, you know, I think you can call
a reacceleration when you get there. I definitely am not
talking to businesses who are talking about blowing out earnings.
I don't. I don't hear one of those kind of accelerations.
So I don't hear frothiness yet. But I am hearing
some very positive vibes on the consumer spending side, which
(10:51):
I'm pleased to hear.
Speaker 3 (10:52):
If inflation is warm, and maybe if there's upside risks
still to inflation, why could there be more to it
than just yeah, terriff, sorry, maybe, but like, could there
be something more going on? And perhaps that consumer strength
pretty large deficit still even with the revenue that's coming
in from tariffs. Maybe someone like the it's been I
(11:14):
don't know, what do you think is the story on inflation?
How much is tariffs and how much is other stuff?
Speaker 4 (11:18):
Well, so I just think it takes a long time
to get inflation back to two percent. If you go
back and look at the Vulgar years, and of course
he did stuff to the economy that was much more
aggressive than what we did, and he of course he
had inflation that was much more ingrained and didn't have
an inflation target, but he took rates up a lot
inflation came down a lot, but it didn't get to
two percent. It was four, oh yeah, And you know,
(11:39):
it sort of eked its way down from four to
three and a half to three to two.
Speaker 3 (11:43):
And a half, and then throughout the eighties and nineties exactly.
Speaker 4 (11:45):
For twenty years until it sort of hit two and
sort of starts sticking around too. So I give you
that just for perspective, and you know, again from my experience,
I'll tell you why that happens, which is people don't
just immediately go back to the old number. You've got
some amount of care to do wages and prices people
who didn't raise it. People's expectations, I think are very
significantly triggered by actual inflation. And so my old job,
(12:09):
we had to raise prices every year, and we sort
of thought about it, and a lot of times we
raise price based on last year's inflation, and so it
just there's some stickiness to it. And so what we've
seen is very encouraging on the inflation numbers. They've gone
from you know, seven at their peak down to you know,
somewhere in the high twos. Maybe it'll tick up to
the three now. And so I think that's one piece
of it. Actual just take it's sticky. It takes a while.
(12:31):
And then the second piece of it is, I do
think you've got this tariff concern in there, and that
people are passing on costs, and then people who don't
even have the costs are using this as a cover
to pass on costs.
Speaker 3 (12:41):
So just real quickly. Then, if there's all these factors,
et cetera, why is there conversation about cutting rates, Or
if there is conversation about cutting rates, how seriously should
the should people be take those two percent commitment?
Speaker 4 (12:54):
Well, so there's calibration going on. So you've got unemployment
that's low but maybe training. You've got inflation that's been
coming down and maybe ticked up but maybe for one
time reason. And you've got a neutral rate that is
by all accounts lower than where we are, but lots
of debate about is it just a little bit lower
or is it significantly lower? And so I think those
three things go together, and people just ask it, do
(13:16):
you recalibrate to a different number in the context of this,
or are we well positioned where we are?
Speaker 2 (13:22):
This discussion actually reminds me, what's your story for why
inflation did come down in the post pandemic period. Is
it the sort of immaculate disinflation explanation where the supply
chain pressure has just started dissipating, or did the Fed's
actions actually have a kind of sledgehammer effect here.
Speaker 4 (13:41):
I think it's in all of the above. I mean,
if the FED doesn't act when people expect us to act,
then I think that sort of unwinds expectations the way.
That's not very helpful. On the other hand, you can't
ignore that a lot of the supply constraints that we're
driving prices up, commodity prices, ships backed up in harbor's chips,
no in cars, people not at work. Those things also amilorated.
(14:02):
We also had a really big immigration number for about
two years. That meant, you know, the supply side jobs
got filled a lot faster. It definitely released the pressure
and a lot of things so supply help. Hopefully, the
FED did its part and the combination of things brought
it down.
Speaker 3 (14:34):
When we were in Alaska, we learned that there is
a major furniture expo every year in your district in
North Carolina. Also North Carolina. It's like, I think if
people think of like regions that have lost from trade
or regions that got hit really hard by free trade.
I'm not even sure if it's true, but certainly that
is the perception. It's actually it's your district.
Speaker 2 (14:55):
Well, this is one thing we learned by traveling with
Tom and going on some of his trips to talk
to local businesses. There is a sense that manufacturing in
North Carolina has been hollowed out.
Speaker 3 (15:05):
Absolutely, it's a very short sense. But there's also cities
in North Carolina that are some of the most dynamic
in the entire country, especially over the last couple of decades.
But I'm just curious right now, like tariffs in your district,
what are you saying.
Speaker 4 (15:17):
So, no question, Historically, the textile industries, the furniture industries
got hit very hard. If you look at the Carolinas though,
and you took it the last twenty five years, you'd
say there's also been a lot of foreign based manufacturers
that have put manufacturing sites. I'm thinking of Greenville, South Carolina,
Spartanburg where I was last week, where you've got BMW
and big auto manufacturers you know, and their whole supply
(15:38):
chains coming into town. You know what we hear, right
now is it's very different by sector you're in, and
it's very different by your position in that sector. So
there are a lot of people who manufacture in South
and South and North Carolina, but they source abroad and
they're very worried about their costs. Think of the big
auto manufacturers. There's a lot of people who manufacture in
(15:59):
North Carolina and they're one hundred percent American made, and
they think this is the greatest thing in the world
because they'll get protection for their sectors. Or the people
on the other side who've been you know, putting low costs,
they're going to get So it's very very dependent.
Speaker 2 (16:10):
On where you say, well, speaking of you know, specific
sectors potentially benefiting. There are loads of tariff headlines still
coming in, but one of them that caught my eye
was Trump saying that he was going to start a
furniture tariff investigation with a view to setting tariffs on
furniture imports into the US, specifically to help North Carolina.
(16:32):
What's your immediate reaction when you see a headline like that.
Speaker 4 (16:35):
Well, we've been seeing a lot of headlines, you know, Yeah,
I know on the tariffs thing. So first thing I
downed is I tried not to serve headlines too much.
We'll see what tariffs get applied on what industries, with
what duration and what products, and that's what a lot
of the manufacturers I talked to also do. I'm sure
the people who manufacture furniture and North Calina would be
very supportive. There aren't actually all that many. A lot
(16:57):
of jobs have been lost, and I think if people
start to consider bringing jobs back, the thing you hear about,
you know, over and over and over again, is just
availability of workforce and the cost of workforce. You know,
the jobs that I think are most likely to come
back are ones that are the least dependent on workforce,
or have the highest skilled workforce, or have high paid workforce.
(17:19):
And a lot of these jobs have gone to place
with very low cost workforces. And I don't know the
level of tariff that one would need to get to to,
you know, bring those jobs back, but it's a pretty
significant number. The other thing that's really not talked about
much that I just think is interesting. I was in Hickory,
which is a factory town. I talked to a lot
of furniture manufacturers there, and they're looking for workers. This
(17:39):
is during the COVID and they were, you know, having
a very strong demand cycle. But I went to community college.
I talked to a bunch of workers there and I said, well,
you guys trained to get in the furniture industry, and
several of them told me, you know, my dad was
in there and got laid off, and so we're not
going there. You know, the thought that people are waiting
to go back into the jobs to build the matters
(18:00):
a lot too. And so as we bring jobs back
in the country, which would be great, and I hope
we do, making sure there's stable jobs and their jobs
that are going to be around for a generation is
very important, I think in terms of getting workers into
the jobs.
Speaker 3 (18:11):
We are recording this today that Chairman Powell gave his
final speech as FED chair at Jackson Hole. It was
a policy speech and he did not talk about FED
independence and the attacks on FED independence that are coming
from the White House and so forth, the political pressure
that the FED has been coming under. When you think
about inflation, maybe not in the short term, maybe not
(18:34):
you know, the latest PPI reading or whatever, but when
you think about like the long term, like the ability
of the FED to maintain that two percent inflation. Do
you think about, like, well, will the US political system
have the sort of stomach to preserve a FED as
an independent agentic force in the economy.
Speaker 4 (18:54):
Well, so we've all relearned something in the last five
years that we didn't know we need to relearn, which
was how much we hate inflation. And inflation, you know,
it feels unfair. You get a raise and then you know,
the money gets spent somewhere else. It creates uncertainty, and frankly,
it's just exhausting. It's exhausting to deal with people who
are trying to raise your prices or to shop around
for better prices, or deal with you know, vendors. And so,
(19:18):
if there's one thing I think the American people have
aligned on over the last five years, it's just how
much we hate inflation. And you know, there's been a
lot of work done in a lot of countries in
terms of what's the best way to get inflation on control?
And an independent central bank is the answer to that question.
The research is very powerful.
Speaker 3 (19:33):
Do you worry that like the that the that over
the medium term, that the sort of political system that
has allowed for an entity like the FED to exist
and operate outside of the electoral cycle is understressed.
Speaker 4 (19:46):
I hope and I expect that this country is going
to recognize that independent central bank is the best way
to get into control the thing which we hate the most.
Speaker 2 (19:53):
Just on the people hate inflation point, which I think
is a very salient idea. You've been very vocal on
the idea of like companies having learned the inflation playbook, right,
like they tested price elasticity during the last round of
high inflation, and you know, maybe maybe there's more of
(20:14):
an impulse this time around to raise prices to offset
either higher input costs or higher tariff costs. Are you
still sort of on the inflationary impulse side. Do you
think that residual experience still matters.
Speaker 4 (20:27):
I definitely think the residual experience matters. When I talk
to companies about the tariffs that hit them. The first
thing here is going to pass it on to my customers.
But I also think this residual experience matters on the
customer side. I guess I just remind everybody that this
isn't twenty twenty two. In twenty twenty two, a bunch
of supply costs hit a bunch of companies that passed
it on and the people who received them. You and
(20:49):
I we hadn't spent money for a year and a
half with COVID, We'd gotten stimulus payments, our assets were
quite frothy and highly valued. We were ready for revenge
spending spent. And that's twenty twenty two. We're not in
twenty twenty two, when, by the way, we also had
accommodateive monetary policy. We're in twenty twenty five. Here we
have restrictive monetary policy. And in addition, you have consumers
(21:10):
who are already trading down. And so I've said earlier,
they've got money, but they're not dying to spend it.
And what you hear is normal price retailer to value, retailer,
beef to chicken, vacationist staycation, that's what you're hearing. And
people in private label is growing, and so I think
those customers are not going to accept those price increases
the same way they have. And it's sort of Milton
(21:31):
friedmany a little bit. If there's not more money in
the system, how are you going to get inflation? And
you could argue there's some money in the system and
you'll get some inflation. I believe that, but I don't
think you're going to get anywhere near the kind of
stuff that people imagine, because this company that's now learned
how to pass on prices is going to meet a
consumer who's ready to resist it.
Speaker 2 (21:50):
You mentioned restrictiveness just then, and this is something that
Pal also said in the speech today. He said, you know,
rates are still restrictive, I think he said, albeit modestly so.
But when I look at stocks at all time highs
and credit spreads, you know, basically thirty year lows financial conditions,
things don't seem all that restrictive. If you look specifically
(22:12):
at the market. How is the FED sort of coming
to the conclusion about the relation of benchmark rates here
or the.
Speaker 4 (22:19):
Character As you can tell from the SEP. Different people
have different models. Of course, the model that we use
in Richmond, you know, has a lot to do with
the impact of rates on the economy, and so you know,
you can see what rates are and you can lag
it and look at you later and see what the
impact is. One thing I like to look at is
nominal consumption. Nominal consumption was quite elevated during the pandemic.
(22:40):
We raised rates and it came down still at a
decent level. It's been sort of five and a half
percent until the last couple of months, but it sort
of seems to have come off that in the last
month of two. We'll see what the more recent data is.
But that nominal consumption is a great way to look
at it because it just says what's happening rates to
what people are doing in the economy. I do agree
there are lots of other factors that affect dynamis in
(23:00):
the economy, and if the market's frothy, a thing we
don't control, that's also part of it. But in the
part we control, I think you can see it by
its works.
Speaker 3 (23:07):
I think I just have one more question for you,
And I just feel like, maybe because you talk to
businesses so much, maybe you have some fresh insight on this.
Do you hear much about electricity prices in your conversations
these days? Because I feel like there's starting to be
in the news and the strain on the grid, and
but for whatever reason, how is that you're hearing much
about that?
Speaker 4 (23:26):
A lot of concern about electricity availability? Okay, you know,
are we going to have an electricity to power all
the AI and all the data centers are going up.
You know there are states, you know, Virginia's one where
data centers are quite right, and so you do hear
a little bit of public concern about what's this all
going to mean? But just a reminder that electricity prices
tend to lag significantly. They got to go through rate processes.
(23:48):
Every state is different, and so you know, I'm not
sure that's hitting the consumer public. I do hear lots
of I'll just call it local infrastructure funding HOSS being
passed on to consumers and consumers making trade offs in
that context. So you know, there was a big water
increase in the town I was in in Maryland a
month ago, and a lot of conversations about people not
(24:09):
paying their water bill. Because so you do hear it
more broadly, but I wouldn't say that the price is
yet hit.
Speaker 2 (24:15):
Okay, So I'm going to ask a sort of on
the ground color question. But when you think about this
Jackson Hole and you think about maybe last year is
Jackson Hole in twenty twenty four, can you compare and
contrast the vibes? How are they different?
Speaker 4 (24:28):
This is my eighth one. Two of them were virtual.
They're not nearly as good when they're virtual no fish,
it's a nice picture.
Speaker 1 (24:37):
I'd say.
Speaker 4 (24:37):
In general, the vibe is pretty much the same every time.
I mean, I really like them because there's a they
turn over the population a little, you know, and so
they are new.
Speaker 2 (24:48):
There's new guests every time.
Speaker 4 (24:49):
The academics, I haven't met new leaders. I haven't met,
so that's kind of fun for me, and I get that,
but I'm not sure the vibe changes all that much.
It's a it's a real privilege to be invited to
like this, and I enjoy it. I don't spend a
lot of time thinking about the vibe. The vibes exactly all.
Speaker 2 (25:06):
Right, Tom Barkin, thank you so much for coming back
on all thoughts.
Speaker 4 (25:09):
Really appreciate it, and I always appreciate being with you things.
Speaker 3 (25:11):
Thank you so much.
Speaker 2 (25:25):
Joe. You know, I have some furniture from North Carolina.
It's really good quality.
Speaker 3 (25:30):
Maybe maybe in North Carolina, just imported through the port
or the shows.
Speaker 2 (25:35):
No, actually made in North Carolina. And I know that
because it's vintage, so it was probably back when the
furniture industry was a little bit bigger there.
Speaker 3 (25:42):
I do think like did North Carolina. I mean, it's
a long standing debate. Some of the biggest boom cities
of the twenty and twenty tens were like you know,
Durham and all those places, et cetera. You know, it's
still like going back to Charlotte. Charlotte was huge booms,
all the bank stuff there. Like you think about the
last twenty five years, this is the area that we
(26:03):
think is like most quote hollowed out, etc. It's also
like one of the fastest growing. Here is the whole
is it complete? Even the past is complicated. Hindsight is
not twenty twenty.
Speaker 2 (26:12):
Yeah, and I think complication is sort of Complication and
uncertainty are the big buzzwords of this conference. Clearly, like
we hear it over and over again that there are
risks on both the employment side of the mandate and
the price side of the mandate, and central bankers basically
have to make like a tough choice over which one
they're going to concentrate on. I did think it was
interesting that Tom mentioned that he read Pal's speech is
(26:36):
more down the middle than perhaps the market did. No.
Speaker 3 (26:39):
I thought that was interesting too. I like the fog
analogy that you actually don't want to break too much
of the fawity fog either because the car behind you
might not react in time. That that was really good.
I also liked the part about how three quarters of
the time vigg as central banker is really easy because
either you hike or you cut or you go on
a hike in Wildman the at the fourth time, like
(27:01):
the fear of stagflation, Yeah, right, that's what that's what
that forth. So here's like, this is that fourth time? Now,
how persistent will it be with it? But the basic
like what we're talking about in all these conversations, what
we're talking about is this building anxiety about stagflation.
Speaker 2 (27:16):
It's stagflation combined with really difficult to predict timelines for
exactly when it materializes. Right, Like that also seems to
be a complicating factor. Okay, well on that note, shall
we leave it there.
Speaker 3 (27:28):
Let's leave it there.
Speaker 2 (27:29):
This has been another episode of the aud Lots podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway
and I'm Jill Wassenthal.
Speaker 3 (27:36):
You can follow me at the Stalwart. Follow our producers
Kerman Rodriguez at Carman armand Dashel Bennett at Dashbot and
Kilbrooks and Kilbrooks For more Odd Lots content, go to
Bloomberg dot com slash odd Lots or of the daily
newsletter and all of our episodes, and you can chat
about all of these topics twenty four to seven in
our discord Discord dot gg slash.
Speaker 2 (27:55):
Out Lots and if you enjoy all thoughts. If you
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And remember, if you are a Bloomberg subscriber, you can
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Hosts And Creators
Joe Weisenthal
Tracy Alloway
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