Hello, and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway and I'm Joe Wisenthal. Joe, it's it's nearly the end of twenty twenty three. It's been a wild ride.

Hello, and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway and I'm Joe Wisenthal. Joe, it's it's nearly the end of twenty twenty three. It's been a wild ride.

What an incredible year. I mean, the stat that just like jumps out to me is forty one point two four percent as of right now we're recording this December fourteenth. That is the annual gain of the Nasdaq twenty three point one percent on the S and P mortgage rates below seven percent. Good times. It looks like good times when I.

What an incredible year. I mean, the stat that just like jumps out to me is forty one point two four percent as of right now we're recording this December fourteenth. That is the annual gain of the Nasdaq twenty three point one percent on the S and P mortgage rates below seven percent. Good times. It looks like good times when I.

Look at the screen, even though you're talking about the rally, it sounds like you haven't escaped the year unscathed. Because of your voice, it sounds like you've had a rough twenty twenty three.

Look at the screen, even though you're talking about the rally, it sounds like you haven't escaped the year unscathed. Because of your voice, it sounds like you've had a rough twenty twenty three.

It's been a good twenty twenty three. But my voice is not in great shape at this moment.

It's been a good twenty twenty three. But my voice is not in great shape at this moment.

But Joe was singing last night at his first show.

But Joe was singing last night at his first show.

Yes, that is my excuse that I was out late at a bar singing country music. But here I am, and I'm very excited to talk about the bizarre, weird, unexpected year that twenty twenty three was.

Yes, that is my excuse that I was out late at a bar singing country music. But here I am, and I'm very excited to talk about the bizarre, weird, unexpected year that twenty twenty three was.

Yes, so if you recall this time last year in twenty twenty two, it seemed like the consensus going into the year was we were going to have a recession. You know, people were talking about a hard landing, this idea that the FED was going to have to keep hiking rates and that that was eventually going to have to bring down employment and we were going to see a slow down in the economy. And yet here we are and it hasn't materialized.

Yes, so if you recall this time last year in twenty twenty two, it seemed like the consensus going into the year was we were going to have a recession. You know, people were talking about a hard landing, this idea that the FED was going to have to keep hiking rates and that that was eventually going to have to bring down employment and we were going to see a slow down in the economy. And yet here we are and it hasn't materialized.

This time last year there was just like so much pessimism and the market was really like in a rough shape in November December last years this view, it's like, you know what things are going to things are in rough shape, but it doesn't matter. Inflation is still so high. The FED has to keep pressing, the Fed has to keep hiking. Yeah, it was pretty grim. And then somehow like this is the big thing that I think people are going to be talking about for years, which is, how did we have like the biggest rate hike cycle ever or one of them without more slowing in the economic activity? And how did inflation come down from where it was at its peak in the middle of twenty twenty two without more weakening in the labor market?

This time last year there was just like so much pessimism and the market was really like in a rough shape in November December last years this view, it's like, you know what things are going to things are in rough shape, but it doesn't matter. Inflation is still so high. The FED has to keep pressing, the Fed has to keep hiking. Yeah, it was pretty grim. And then somehow like this is the big thing that I think people are going to be talking about for years, which is, how did we have like the biggest rate hike cycle ever or one of them without more slowing in the economic activity? And how did inflation come down from where it was at its peak in the middle of twenty twenty two without more weakening in the labor market?

Yes, and I should note it wasn't just economists and analysts who were very pessimistic on the economy going into twenty twenty three. We had a lot of you know, real world people for lack of a better term, who also thought that things were going to slow down. Like, for instance, you had I think the Conference Board survey of CEOs like almost one hundred percent. We're predicting a recession in the US. All the sentiment surveys, as we've been discussing on the show, have been coming from totally well back until recently we're coming in very negative. So you know, this wasn't just an economist problem. But I think we should go over the year and we should review, like what exactly happened that surprised a.

Yes, and I should note it wasn't just economists and analysts who were very pessimistic on the economy going into twenty twenty three. We had a lot of you know, real world people for lack of a better term, who also thought that things were going to slow down. Like, for instance, you had I think the Conference Board survey of CEOs like almost one hundred percent. We're predicting a recession in the US. All the sentiment surveys, as we've been discussing on the show, have been coming from totally well back until recently we're coming in very negative. So you know, this wasn't just an economist problem. But I think we should go over the year and we should review, like what exactly happened that surprised a.

Lot of people.

Lot of people.

Well you said this, I think in our recent episode that we did with Ian Hatzias, and I totally agree. I mean, I feel like the last few years will be one of these periods and economics that people are going to be writing PhD papers on for fifty years, right, kind of like the Great you know, the Great Depression, or other periods that are these sort of holy grails or Rosetta stones for understanding how the economy works. There's going to be so much debate and work and academic research and relitigating debates, et cetera about like what happened over the last four years.

Well you said this, I think in our recent episode that we did with Ian Hatzias, and I totally agree. I mean, I feel like the last few years will be one of these periods and economics that people are going to be writing PhD papers on for fifty years, right, kind of like the Great you know, the Great Depression, or other periods that are these sort of holy grails or Rosetta stones for understanding how the economy works. There's going to be so much debate and work and academic research and relitigating debates, et cetera about like what happened over the last four years.

I really hope we still have odd lots in twenty seventy three, and we'll just do episodes on like what happened.

I really hope we still have odd lots in twenty seventy three, and we'll just do episodes on like what happened.

My voice will sound better.

My voice will sound better.

Then, So okay, all right, why don't we just get to it. We are going to be speaking with Anna Wong. She is the chief US economist for Bloomberg Economics. It's the first time we've ever had her on the show, which is kind of surprising. Anna, Thank you so much for coming on all thoughts, happy.

Then, So okay, all right, why don't we just get to it. We are going to be speaking with Anna Wong. She is the chief US economist for Bloomberg Economics. It's the first time we've ever had her on the show, which is kind of surprising. Anna, Thank you so much for coming on all thoughts, happy.

To be here at Tracy.

To be here at Tracy.

So, this time last year, why don't you walk us through what exactly Bloomberg Economics was expecting. How did you expect this particular year to turn out.

So, this time last year, why don't you walk us through what exactly Bloomberg Economics was expecting. How did you expect this particular year to turn out.

Yeah, So, a year ago, or even more like a year and a half ago, we first put out our recession model because at the time the feed started hiking rates and there was just a lot of curiosity about how this would end, and our goal then was to have a more precise timing of the probability of recession as opposed to just giving a vague what is the twelfth month ahead recession? And there's a cottage industry of these models out there, and so our model was to put out some kind of numbers on each month of probability in July, August and over that period since. So this this model first came out in spring of twenty twenty two, and at that time the model is actually foreseeing a recession a high probability of recession only start aring towards the end of twenty twenty three and even in early twenty twenty four, and over the course of last year and this year, that model evolves in terms of the timing of when that trigger is pushed. And all of the calls of that model has been that the recession would begin in the second half of twenty twenty three, and so coming into this year, we thought that the recession that is so widely expected would be towards the end of twenty twenty three.

Yeah, So, a year ago, or even more like a year and a half ago, we first put out our recession model because at the time the feed started hiking rates and there was just a lot of curiosity about how this would end, and our goal then was to have a more precise timing of the probability of recession as opposed to just giving a vague what is the twelfth month ahead recession? And there's a cottage industry of these models out there, and so our model was to put out some kind of numbers on each month of probability in July, August and over that period since. So this this model first came out in spring of twenty twenty two, and at that time the model is actually foreseeing a recession a high probability of recession only start aring towards the end of twenty twenty three and even in early twenty twenty four, and over the course of last year and this year, that model evolves in terms of the timing of when that trigger is pushed. And all of the calls of that model has been that the recession would begin in the second half of twenty twenty three, and so coming into this year, we thought that the recession that is so widely expected would be towards the end of twenty twenty three.

Backing for a second, what goes into a recession model and what does that even mean? Like how do you build or construct a model and something like that.

Backing for a second, what goes into a recession model and what does that even mean? Like how do you build or construct a model and something like that.

Yeah, there's a variety of models, right, So for example, our model, we took thirteen indicators, typical indicators that had some track record in identifying recessions in the past, and most many of them are overlapped with the leis from conference sports. So it's yield curve spread sentiment models. And so any models that have those two things, yield curve spreads and sentiments would tell you there's a high probability of recession. Right, Even the LI has over ninety percent probability of recession. But another type of models that one uses just thinking about the probability that NBER would date a recession, and NBR told the public that they usually look at six monthly indicators, and so one could perceivably be also building models based on that. But of course, when we make a call for a recession, that is only a very small part of all our inputs. We tend to look at things in Bloomberg Economics, in my team, we tend to look at things in three ways. We approach a question in three ways, and if those three ways all say the same thing, then we make the call. And so for a recession call last year, we also what really influenced our view is the range of other theoretical models. So the model recession probability models I just described are just empirical models, which has no theoretical frameworks, right, But economists, of course and their tools that we have generally caliber models. We have the large scales model, we have state of the art models, and so we used a model on the terminal which is called shock, which mimics I.

Yeah, there's a variety of models, right, So for example, our model, we took thirteen indicators, typical indicators that had some track record in identifying recessions in the past, and most many of them are overlapped with the leis from conference sports. So it's yield curve spread sentiment models. And so any models that have those two things, yield curve spreads and sentiments would tell you there's a high probability of recession. Right, Even the LI has over ninety percent probability of recession. But another type of models that one uses just thinking about the probability that NBER would date a recession, and NBR told the public that they usually look at six monthly indicators, and so one could perceivably be also building models based on that. But of course, when we make a call for a recession, that is only a very small part of all our inputs. We tend to look at things in Bloomberg Economics, in my team, we tend to look at things in three ways. We approach a question in three ways, and if those three ways all say the same thing, then we make the call. And so for a recession call last year, we also what really influenced our view is the range of other theoretical models. So the model recession probability models I just described are just empirical models, which has no theoretical frameworks, right, But economists, of course and their tools that we have generally caliber models. We have the large scales model, we have state of the art models, and so we used a model on the terminal which is called shock, which mimics I.

Was looking at this earlier. It's pretty cool. Actually, what's it called shot shot shok go on the terminal, right.

Was looking at this earlier. It's pretty cool. Actually, what's it called shot shot shok go on the terminal, right.

And that model mimics the feed's own in house general caliber model FIRMUS. And that model would suggest that the lags are monetary rate hikes at least on labor market should be about eighteen to twenty four months, which is about the standard of what has been found in economic literature. And then another state of the art model we use is a model that central bankers have been discussing a lot last year. This is based on a cutting edge economic paper, and that was the paper that tipped a lot of central bankers off into thinking about shorter legs of monetary policy. It's a paper by Bower and Swanson, and that was the paper that found that, in fact, the legs of monetary policy are much shorter. So we also looked at that model, and what those models found, especially that Bauer and Swanson, the very cutting edge model, is that yes, it's true that the legs of monetary policy are shorter for for example, for industrial production, we already have seen you know, i P declined for you know, over a year, and in fact, the decline of industrial productions almost like exactly matched the contour of that model. And so that model also says that inflation now responds faster to fetch rate hike then you know, back in the times of Milton Friedman. But the one area which the model says that two areas actually that says that the lags of frate hikes still have yet to really hit the peak is labor market and also credit market. And I think those two are precisely the area where we have not seen much adjustment, and that is why we don't have most people at least don't think we have a recession. Yeah this year.

And that model mimics the feed's own in house general caliber model FIRMUS. And that model would suggest that the lags are monetary rate hikes at least on labor market should be about eighteen to twenty four months, which is about the standard of what has been found in economic literature. And then another state of the art model we use is a model that central bankers have been discussing a lot last year. This is based on a cutting edge economic paper, and that was the paper that tipped a lot of central bankers off into thinking about shorter legs of monetary policy. It's a paper by Bower and Swanson, and that was the paper that found that, in fact, the legs of monetary policy are much shorter. So we also looked at that model, and what those models found, especially that Bauer and Swanson, the very cutting edge model, is that yes, it's true that the legs of monetary policy are shorter for for example, for industrial production, we already have seen you know, i P declined for you know, over a year, and in fact, the decline of industrial productions almost like exactly matched the contour of that model. And so that model also says that inflation now responds faster to fetch rate hike then you know, back in the times of Milton Friedman. But the one area which the model says that two areas actually that says that the lags of frate hikes still have yet to really hit the peak is labor market and also credit market. And I think those two are precisely the area where we have not seen much adjustment, and that is why we don't have most people at least don't think we have a recession. Yeah this year.

That's really interesting, especially putting my former credit market reporter on the credit side of it. And I do have a pet theory right now that I think I've we've talked about, which is that the sheer size of the private credit market might be making a difference here, like if you have this bundle of money that actually doesn't seem to be that rate sensitive in the current environment, maybe it's propping up parts of the market. But talk to us about why the credit market might not be as efficient at transmitting rate hikes as it once was.

That's really interesting, especially putting my former credit market reporter on the credit side of it. And I do have a pet theory right now that I think I've we've talked about, which is that the sheer size of the private credit market might be making a difference here, like if you have this bundle of money that actually doesn't seem to be that rate sensitive in the current environment, maybe it's propping up parts of the market. But talk to us about why the credit market might not be as efficient at transmitting rate hikes as it once was.

Yeah, I think that this might be the surprise the prices in the credit market might be a surprise of twenty twenty four, which is well. I think my pet theory of why credit market hasn't adjusted yet in twenty twenty three is that corporates have locked in low interest rate in the last right, everybody knows that.

Yeah, I think that this might be the surprise the prices in the credit market might be a surprise of twenty twenty four, which is well. I think my pet theory of why credit market hasn't adjusted yet in twenty twenty three is that corporates have locked in low interest rate in the last right, everybody knows that.

And also on.

And also on.

The household side, household also had wonderful balance sheets during the pandemic. Many households paid down the debt so deleveraged during the pandemic. But at the same time, I think this is the following areas where I don't think the market understands very well for households balance sheets, how really how accurate are the credit scores being reflected? So I think that the credit for barons, a lot of the debt for barance during the pandemic had distorted the credit scores. Inflated credit scores, and there are some studies that estimate that perhaps by as much as even fifty basis points. So a lot of the you know what currently looks like to be near prime are actually suprime, and some prime could be actually near prime. And then looking at auto delinquencies, which has risen to you know, the level of twenty ten, right, and you look at who are the ones who are defaulting. They're the ones who bought cars in twenty twenty one and twenty twenty two when car prices were extremely high, and they are also the ones who are having suprime and near prime credit ratings. So the question, I think in twenty twenty four is how many of these borrowers who have leveraged up in the past two years are in fact the credit rating that the good credit quality that they looked to be like. And when the moment that more defaults happen, As you know, prices slow when inflation slows, what else happens is income slows, wage grows slow, and that that is if interest rate doesn't fall as fast. So suppose that the Fed do ultimately do hold higher for longer whereas income and prices.

The household side, household also had wonderful balance sheets during the pandemic. Many households paid down the debt so deleveraged during the pandemic. But at the same time, I think this is the following areas where I don't think the market understands very well for households balance sheets, how really how accurate are the credit scores being reflected? So I think that the credit for barons, a lot of the debt for barance during the pandemic had distorted the credit scores. Inflated credit scores, and there are some studies that estimate that perhaps by as much as even fifty basis points. So a lot of the you know what currently looks like to be near prime are actually suprime, and some prime could be actually near prime. And then looking at auto delinquencies, which has risen to you know, the level of twenty ten, right, and you look at who are the ones who are defaulting. They're the ones who bought cars in twenty twenty one and twenty twenty two when car prices were extremely high, and they are also the ones who are having suprime and near prime credit ratings. So the question, I think in twenty twenty four is how many of these borrowers who have leveraged up in the past two years are in fact the credit rating that the good credit quality that they looked to be like. And when the moment that more defaults happen, As you know, prices slow when inflation slows, what else happens is income slows, wage grows slow, and that that is if interest rate doesn't fall as fast. So suppose that the Fed do ultimately do hold higher for longer whereas income and prices.

Are coming down.

Are coming down.

That would means that there would be more delinquencies. So when that moment happened, whether there will be a credit crunch versus just a normal gradual credit slowed down depends on how the lenders is seeing the information. Right, This is the famous at first selection issue is like, if there's a portion of people whose credit scores don't appappropriately reflect their true behavior, do lenders can lender sees who are the bad seats who are not? And this is like a famous a symmetry in the used car market, right, This is why it's very hard.

That would means that there would be more delinquencies. So when that moment happened, whether there will be a credit crunch versus just a normal gradual credit slowed down depends on how the lenders is seeing the information. Right, This is the famous at first selection issue is like, if there's a portion of people whose credit scores don't appappropriately reflect their true behavior, do lenders can lender sees who are the bad seats who are not? And this is like a famous a symmetry in the used car market, right, This is why it's very hard.

Market for lemons, right, right, What is the takeaway from the realized disinflation.

Market for lemons, right, right, What is the takeaway from the realized disinflation.

That we've seen? You know, I think at one point, CPI is around nine percent now where basically you can argue that in recent months we are by some measures at the Fed's target, and yet unemployment is at three point seven percent. And that was a set of conditions that very few people would have anticipated was even possible, in part because the standard story as well, you need to reduce demand to use prices, and the way you use demand is by people unfortunately having to lose their jobs. What have we learned about, at least what we've seen so far in.

That we've seen? You know, I think at one point, CPI is around nine percent now where basically you can argue that in recent months we are by some measures at the Fed's target, and yet unemployment is at three point seven percent. And that was a set of conditions that very few people would have anticipated was even possible, in part because the standard story as well, you need to reduce demand to use prices, and the way you use demand is by people unfortunately having to lose their jobs. What have we learned about, at least what we've seen so far in.

This cycle, Yeah, Joe, So I would say one will have to acknowledge that it's going better than what everybody thought at first, that it will have to be extremely painless. But at the same time, I think, as as Powell said yesterday, it is too soon to declare victory on flamee inflation. And and here's why. So so, based on various model decomposition of the drivers of inflation over the last two years, our assessment is that half of it is driven by supply and about half of it is driven by demand. But of course it's the mixture of those two high demand while supply is heard which led to this explosive inflation. Right. And in terms of inflation, we saw this year earlier this year when SVB collapsed. At that time the CPI recall, it was actually falling and everybody thought, uh, inflation is not a problem. But infect the supercore, which is Powell's preferred measure, which captures the labor intensive part of inflation, was not slowing at all. But then moving into the second half of this year, we start to see a lot of disinflation and it actually start in June this year. And this is where I said that you know, the lacks of monetary policy on labor market is about eighteen to twenty four months, so that slowed down in wage growth actually hit right about the time that all these models would suggest, and so we started seeing movement in that, but still core inflation is still around four percent during the summer. On the second day of the December FOMC meeting, the FOMC received a very critical data point. It is the November's c PPI sorry, and so feed staff usually can pull together a PCE inflation number very quickly the moment they have both CPI and PPI numbers in their hand. So on the second day of December FOMC meeting, that PPI number came in to suggest that actually core PCE for November is going to be very low, as we estimate that it's only zero point zero four percent, possibly so round to zero in November, and this would mean that the six month annualized core PCE, this is the measure that Chris Waller and a lot of FED officials are looking and engaging, the momentum of inflation would come in at two point zero likely in November, right at the FET's target. So the FOMC has that data point on the second day, in the morning of the December FOMC meeting, and that explained why the Summary of Economic Projection see downward revision of core PCE to only three point two percent for end of twenty twenty three. Now, how do you make of this significant drop in core PCE, right, And so I would say that when this number ultimately is publicly released late in December, I think it would spark a big debate. On one side, a lot of people would say the FED is already at target, they should be cutting rates in January even But the second second group of people, and I would be in that second group of people, would be saying that, but a lot of the disinflation in November is actually in categories that's exhaustions to the feds R effect. It's due to China. If you look at the downside surprises, it's actually all in categories that with high China import contents there in apparels, clothing, furnishings, and those actually drove almost all of the downward surprises. So what I'm I think is happening, and this give me some memory of what happened in twenty fourteen and twenty fifteen was you have global growth slowed down and start by China, and then that led to commodity prices decline. And also that also sometimes when global growth slowed down occasionally that could also lead to OPEK having trouble keeping a discipline with an OPAC and that leads to a race to the bottom. On top of that, you have US shale who's pumping suddenly a lot more of that actually was the dynamics in twenty fifteen and twenty fourteen that led to that collapse in oil prices. So when you have this trying to slow down and what's going on with oil prices, you actually could lead to this dissiplation that we're seeing right now. But the implication is also that for the part that the FED has been focusing on supercore services that actually doesn't look as great. So services inflation actually picked up a little bit in November in the core PCE, So I think for the FED to declare victory too soon would be a mistake. And just looking an outlook our outlook out to twenty twenty four, we do see the six month annualized core PCE dipping in the first half of twenty twenty four and dropping to even two point two percent in March and then stabilizing it about two point seven percent in the second half of the year, and that would be that last mile of inflation, because the FED should not be happy about two point seven or two point eight percent inflation.

This cycle, Yeah, Joe, So I would say one will have to acknowledge that it's going better than what everybody thought at first, that it will have to be extremely painless. But at the same time, I think, as as Powell said yesterday, it is too soon to declare victory on flamee inflation. And and here's why. So so, based on various model decomposition of the drivers of inflation over the last two years, our assessment is that half of it is driven by supply and about half of it is driven by demand. But of course it's the mixture of those two high demand while supply is heard which led to this explosive inflation. Right. And in terms of inflation, we saw this year earlier this year when SVB collapsed. At that time the CPI recall, it was actually falling and everybody thought, uh, inflation is not a problem. But infect the supercore, which is Powell's preferred measure, which captures the labor intensive part of inflation, was not slowing at all. But then moving into the second half of this year, we start to see a lot of disinflation and it actually start in June this year. And this is where I said that you know, the lacks of monetary policy on labor market is about eighteen to twenty four months, so that slowed down in wage growth actually hit right about the time that all these models would suggest, and so we started seeing movement in that, but still core inflation is still around four percent during the summer. On the second day of the December FOMC meeting, the FOMC received a very critical data point. It is the November's c PPI sorry, and so feed staff usually can pull together a PCE inflation number very quickly the moment they have both CPI and PPI numbers in their hand. So on the second day of December FOMC meeting, that PPI number came in to suggest that actually core PCE for November is going to be very low, as we estimate that it's only zero point zero four percent, possibly so round to zero in November, and this would mean that the six month annualized core PCE, this is the measure that Chris Waller and a lot of FED officials are looking and engaging, the momentum of inflation would come in at two point zero likely in November, right at the FET's target. So the FOMC has that data point on the second day, in the morning of the December FOMC meeting, and that explained why the Summary of Economic Projection see downward revision of core PCE to only three point two percent for end of twenty twenty three. Now, how do you make of this significant drop in core PCE, right, And so I would say that when this number ultimately is publicly released late in December, I think it would spark a big debate. On one side, a lot of people would say the FED is already at target, they should be cutting rates in January even But the second second group of people, and I would be in that second group of people, would be saying that, but a lot of the disinflation in November is actually in categories that's exhaustions to the feds R effect. It's due to China. If you look at the downside surprises, it's actually all in categories that with high China import contents there in apparels, clothing, furnishings, and those actually drove almost all of the downward surprises. So what I'm I think is happening, and this give me some memory of what happened in twenty fourteen and twenty fifteen was you have global growth slowed down and start by China, and then that led to commodity prices decline. And also that also sometimes when global growth slowed down occasionally that could also lead to OPEK having trouble keeping a discipline with an OPAC and that leads to a race to the bottom. On top of that, you have US shale who's pumping suddenly a lot more of that actually was the dynamics in twenty fifteen and twenty fourteen that led to that collapse in oil prices. So when you have this trying to slow down and what's going on with oil prices, you actually could lead to this dissiplation that we're seeing right now. But the implication is also that for the part that the FED has been focusing on supercore services that actually doesn't look as great. So services inflation actually picked up a little bit in November in the core PCE, So I think for the FED to declare victory too soon would be a mistake. And just looking an outlook our outlook out to twenty twenty four, we do see the six month annualized core PCE dipping in the first half of twenty twenty four and dropping to even two point two percent in March and then stabilizing it about two point seven percent in the second half of the year, and that would be that last mile of inflation, because the FED should not be happy about two point seven or two point eight percent inflation.

I definitely want to discuss the outlook a little bit more, but before we do, I'm glad you mentioned these exogenous factors, these exogenous price declines, because there is you know, twenty twenty three has turned out to be better than a lot of people expected, but there is now this vibrant debate about how much of that can be attributed to the rate hikes and by extension, the FED. So I guess my question is how do you think FED tightening has actually worked through this economy and how much of what we've seen so far is due to monetary policy versus perhaps normalization of things like supply chains.

I definitely want to discuss the outlook a little bit more, but before we do, I'm glad you mentioned these exogenous factors, these exogenous price declines, because there is you know, twenty twenty three has turned out to be better than a lot of people expected, but there is now this vibrant debate about how much of that can be attributed to the rate hikes and by extension, the FED. So I guess my question is how do you think FED tightening has actually worked through this economy and how much of what we've seen so far is due to monetary policy versus perhaps normalization of things like supply chains.

Yeah, good, good question, Tracy. You know, I think the way that monetary policy has worked this year is largely as the models expected. As I was saying, if you use the state of the art models, you would see industrial production has declined exactly according to that contour that the model would describe inflation as well, and the places where which has not been behaving as models would describe would be the credit market and labor market. But even so, the labor market in fact is moving in the direction that the model would describe. So you know, with eighteen to twenty four month lag of monetary policy on labor market, we should be seeing a more clear slow down in job job growth in the second half of this year, and I think we did see that. And I will also have to add that the strong non farm payroll data over the year is likely to be overestimating the strength of the labor market. That in fact, about forty percent of the three million non farm payroll gains is due to a biel as birth and death models. So if you think about whether this makes sense, so you know, this is a year where bankruptcy has risen to the level of twenty ten. Right at the same time, business are complaining that it's been very hard for them to hire. So if that's the case, how could it be that new firms could contribute to forty percent of the three million job gains this year? So I think I think that in fact, after all the revisions are done, which will take a year or two more then it will be it will be clear that, in fact in twenty twenty three, the job market did slow down significantly in the second half of this year.

Yeah, good, good question, Tracy. You know, I think the way that monetary policy has worked this year is largely as the models expected. As I was saying, if you use the state of the art models, you would see industrial production has declined exactly according to that contour that the model would describe inflation as well, and the places where which has not been behaving as models would describe would be the credit market and labor market. But even so, the labor market in fact is moving in the direction that the model would describe. So you know, with eighteen to twenty four month lag of monetary policy on labor market, we should be seeing a more clear slow down in job job growth in the second half of this year, and I think we did see that. And I will also have to add that the strong non farm payroll data over the year is likely to be overestimating the strength of the labor market. That in fact, about forty percent of the three million non farm payroll gains is due to a biel as birth and death models. So if you think about whether this makes sense, so you know, this is a year where bankruptcy has risen to the level of twenty ten. Right at the same time, business are complaining that it's been very hard for them to hire. So if that's the case, how could it be that new firms could contribute to forty percent of the three million job gains this year? So I think I think that in fact, after all the revisions are done, which will take a year or two more then it will be it will be clear that, in fact in twenty twenty three, the job market did slow down significantly in the second half of this year.

What do you see in the data that makes you thinking that the strength of the labor market is overstated, because I mean, if small businesses are still to this day and on, we like I said, you know, recording this December fourteenth. Earlier in the week we got the NFIB survey which said that labor, finding labor is still a challenge for many companies. It's like in the first one or two paragraphs of the report that sounds like a robust type labor market. So what do you see the data that makes you think that it's there is this acceleration going on.

What do you see in the data that makes you thinking that the strength of the labor market is overstated, because I mean, if small businesses are still to this day and on, we like I said, you know, recording this December fourteenth. Earlier in the week we got the NFIB survey which said that labor, finding labor is still a challenge for many companies. It's like in the first one or two paragraphs of the report that sounds like a robust type labor market. So what do you see the data that makes you think that it's there is this acceleration going on.

Yeah, several things. So I think the difference between our views, our assessment of the labor market and other soft landing really staunch soft Landers view of the labor market really differs only in how much weight we place in different labor market indicators. For example, job openings, so that has been very high throughout this year, and in fact, for most of most of this year it was still over one point eight vacancies for every unemployed. But we put very little weight in that data because, first of all, a lot of HR recruiters have been fired over the turn of last year, and so logically you would ask yourself if so, if most of the layoffs late in twenty twenty two in early twenty twenty two is in the recruitment industry, than who are the people you know looking for jobs and recruiting people? And second, we do rely on anecdotes, and in turning points of and economy, anecdotes are extremely useful because they don't get revised, and and the FED also relies a lot on Facebook and anecdotes during turning points as well. But so we thought that the JULTS was just overstating and and but what gives us more confidence are the price measures, so wage growth, And throughout the year we have seen wage growth measures coming down softer and softer, even as you see these headline numbers being very strong in terms of hero gains and job openings. And I do believe that that price measures are better collected and less susceptible to revisions because you just collect a price data, right, whereas with counting the number of jobs you need to you need to consider are you appropriately taking account of all the failed firms, because firms who are going bankrupt would not be answering surveys of how many people they hired and so so you know, so that's why we put a lot more focused on price measures, which suggests to us us that in fact, the laborer market is softening more. And also we look at a range of recession rules that are that are based on unemployment, and so, uh.

Yeah, several things. So I think the difference between our views, our assessment of the labor market and other soft landing really staunch soft Landers view of the labor market really differs only in how much weight we place in different labor market indicators. For example, job openings, so that has been very high throughout this year, and in fact, for most of most of this year it was still over one point eight vacancies for every unemployed. But we put very little weight in that data because, first of all, a lot of HR recruiters have been fired over the turn of last year, and so logically you would ask yourself if so, if most of the layoffs late in twenty twenty two in early twenty twenty two is in the recruitment industry, than who are the people you know looking for jobs and recruiting people? And second, we do rely on anecdotes, and in turning points of and economy, anecdotes are extremely useful because they don't get revised, and and the FED also relies a lot on Facebook and anecdotes during turning points as well. But so we thought that the JULTS was just overstating and and but what gives us more confidence are the price measures, so wage growth, And throughout the year we have seen wage growth measures coming down softer and softer, even as you see these headline numbers being very strong in terms of hero gains and job openings. And I do believe that that price measures are better collected and less susceptible to revisions because you just collect a price data, right, whereas with counting the number of jobs you need to you need to consider are you appropriately taking account of all the failed firms, because firms who are going bankrupt would not be answering surveys of how many people they hired and so so you know, so that's why we put a lot more focused on price measures, which suggests to us us that in fact, the laborer market is softening more. And also we look at a range of recession rules that are that are based on unemployment, and so, uh.

Yeah, Bloomberg Economics has its own recession rule. I didn't realize that.

Yeah, Bloomberg Economics has its own recession rule. I didn't realize that.

Yes, So a couple weeks ago I have a piece with Bill Dudley and we consider twenty eight recession rules that are based on unemployment. And the idea is that unemployment is a very good indicator because number one, it doesn't really get revised, and number two, it also unemployment a job is the most important variable economy that determines income consumption saving patterns. So that's why I would focus on unemployment. And so an unemployment rate is just the inflows of people into the unemployed state minus the people escaping the unemployed state, divided by the labor force. Right, that is the unemployment rate. But even within unemployed states, there's a lot of different categories. The most commonly used unemployment rate is the U three rate, the rate that we know about, but they are also U one, which measures the number of people who have been unemployed for fifteen months or longer. There's also U two rate, which measures the people who are laid off and who are temporary workers who finish their temporary stint. And so our twenty eight rules basically look at these three unemployment rates as well as just flow inflows and outflows. And in fact, back in January two thousand and eight, Janet Yeallen was discussing the state of the labor market in the FOMC meeting then, and she was the San Francisco FED president then, and she talked about unemployment flows. And so when you see a lot more people flowing into the unemployed state but having a hard time getting out of it, that is how you get a swelling of the unemployment rate. And you don't necessarily need layoffs to get to get a higher flow of unemployed, right It could be re entrance into the labor market or new entrants into labor market. And in fact, in the most three the nineteen ninety, two thousand and one, two thousand and seven recession, the initial increase in unemployment rate is actually due to entrance, new entrants and reentrant, not layoffs. So the most accurate rule that we have found is the unemployment flows and outflows indicator that whenever the six month moving average of unemployed inflows exceed outflows is when you are about two months after a recession begin. And I think the intuition there is just that usually the beginning of a recession begin with people just finding harder to find a job, not because there's layoffs, but because there are less people quitting, less turnover, so it's harder to find a job. And only after this, you know, the stagnant state goes on for a while and labor market when firms decided because of the low attrition, they have to lay off people, and that's where you get all the layoffs. That's the increase in you tube rate. So based on these this rule, it suggests that we have we are likely already in this state of downturn. And that is why we think that you know, a year from now, or even a year and a half from now, if beer word to time the beginning of a recession, I think October could be a candidate. And usually after this rule is triggered on employment rate would persistently increase because because it's just harder and harder for people to find.

Yes, So a couple weeks ago I have a piece with Bill Dudley and we consider twenty eight recession rules that are based on unemployment. And the idea is that unemployment is a very good indicator because number one, it doesn't really get revised, and number two, it also unemployment a job is the most important variable economy that determines income consumption saving patterns. So that's why I would focus on unemployment. And so an unemployment rate is just the inflows of people into the unemployed state minus the people escaping the unemployed state, divided by the labor force. Right, that is the unemployment rate. But even within unemployed states, there's a lot of different categories. The most commonly used unemployment rate is the U three rate, the rate that we know about, but they are also U one, which measures the number of people who have been unemployed for fifteen months or longer. There's also U two rate, which measures the people who are laid off and who are temporary workers who finish their temporary stint. And so our twenty eight rules basically look at these three unemployment rates as well as just flow inflows and outflows. And in fact, back in January two thousand and eight, Janet Yeallen was discussing the state of the labor market in the FOMC meeting then, and she was the San Francisco FED president then, and she talked about unemployment flows. And so when you see a lot more people flowing into the unemployed state but having a hard time getting out of it, that is how you get a swelling of the unemployment rate. And you don't necessarily need layoffs to get to get a higher flow of unemployed, right It could be re entrance into the labor market or new entrants into labor market. And in fact, in the most three the nineteen ninety, two thousand and one, two thousand and seven recession, the initial increase in unemployment rate is actually due to entrance, new entrants and reentrant, not layoffs. So the most accurate rule that we have found is the unemployment flows and outflows indicator that whenever the six month moving average of unemployed inflows exceed outflows is when you are about two months after a recession begin. And I think the intuition there is just that usually the beginning of a recession begin with people just finding harder to find a job, not because there's layoffs, but because there are less people quitting, less turnover, so it's harder to find a job. And only after this, you know, the stagnant state goes on for a while and labor market when firms decided because of the low attrition, they have to lay off people, and that's where you get all the layoffs. That's the increase in you tube rate. So based on these this rule, it suggests that we have we are likely already in this state of downturn. And that is why we think that you know, a year from now, or even a year and a half from now, if beer word to time the beginning of a recession, I think October could be a candidate. And usually after this rule is triggered on employment rate would persistently increase because because it's just harder and harder for people to find.

Yeah, it's exponential. So you mentioned the Psalm rule, and we had Claudia sam on the show a few weeks ago, and she has made the point in many venues now. But the idea that yes, the Psalm rule exists, and it is one of twenty eight recession rules, as you just mentioned, Anna, but it is just a rule. It is just a guide, and the economic cycle of the post pandemic period has been so unusual that there is a good chance that maybe the rule doesn't apply to this particular cycle. I'm curious how you factor in I guess the extraordinary unusualness of the COVID period into your outlook. Is that something that you take into account when you're looking at things like the relationship between unemployment and the economy. Would you adjust those models for I guess the weirdness of the post pandemic economy definitely.

Yeah, it's exponential. So you mentioned the Psalm rule, and we had Claudia sam on the show a few weeks ago, and she has made the point in many venues now. But the idea that yes, the Psalm rule exists, and it is one of twenty eight recession rules, as you just mentioned, Anna, but it is just a rule. It is just a guide, and the economic cycle of the post pandemic period has been so unusual that there is a good chance that maybe the rule doesn't apply to this particular cycle. I'm curious how you factor in I guess the extraordinary unusualness of the COVID period into your outlook. Is that something that you take into account when you're looking at things like the relationship between unemployment and the economy. Would you adjust those models for I guess the weirdness of the post pandemic economy definitely.

And that's one of the reasons why we were never calling for a recession in twenty twenty two or even first half of this year, because the most important thing to adjust for in terms of the unusualness of the pandemic is the excellent balance sheet of household and corporates right, And you could only really time the downturn once you have a good understanding of when those cushion financial buffers that people have built up build up exhaust themselves. And also another very special factor about the pandemic is this labor shortage, and that could be a reason for why firms would be hoarding war labors and therefore less likely to let people go. However, I would say that we did we always supplement our model based or rule thumb based analysis with historical analysis, and we went back to look at the Beige books, the FOMC transcripts, real time FOMC minutes of previous recessions, and we found that labor shortage is always a problem in previous recession effect. In nineteen seventy three, that was at that time the deepest recession since World War Two. Employment was climbing even eleven months after the recession began. And also that was also a recession where everybody in the FMC at that time was talking about how tight the labor market was. There was enormous labor shortage, and that was why even eleven months, only eleven months into that recession did employment turn negative. And then also the Beige Book, if you go back to the Page Book in two thousand and one, and that is the recession that I think if we were to have one today would be most likely to resemble that one. Was where everybody actually lived through that recession before realizing that there's even one and by the time NBR announced it's already over. And at that time, what people were talking about when that recession started was that labor market is very tight. There's a lot of shortages. There were pockets of weaknesses manufacturing as in hiring, and it's hard to get a manual labor. There are decreased demand for temporary workers, but there's also shortages of white collars. So it actually always this, this narrative of labor shortage, tight labor market always existed in the first month of recessions. That's that's so this is why we to us it was not a powerful enough of an argument to push back against a embarraical regularity. That actually, to be honest, I don't think econdoms have a very good understanding about and so if we don't understand why unemployment rate would always jump by another, you know, one point five percentage point after jumping one point zero point five percentage point.

And that's one of the reasons why we were never calling for a recession in twenty twenty two or even first half of this year, because the most important thing to adjust for in terms of the unusualness of the pandemic is the excellent balance sheet of household and corporates right, And you could only really time the downturn once you have a good understanding of when those cushion financial buffers that people have built up build up exhaust themselves. And also another very special factor about the pandemic is this labor shortage, and that could be a reason for why firms would be hoarding war labors and therefore less likely to let people go. However, I would say that we did we always supplement our model based or rule thumb based analysis with historical analysis, and we went back to look at the Beige books, the FOMC transcripts, real time FOMC minutes of previous recessions, and we found that labor shortage is always a problem in previous recession effect. In nineteen seventy three, that was at that time the deepest recession since World War Two. Employment was climbing even eleven months after the recession began. And also that was also a recession where everybody in the FMC at that time was talking about how tight the labor market was. There was enormous labor shortage, and that was why even eleven months, only eleven months into that recession did employment turn negative. And then also the Beige Book, if you go back to the Page Book in two thousand and one, and that is the recession that I think if we were to have one today would be most likely to resemble that one. Was where everybody actually lived through that recession before realizing that there's even one and by the time NBR announced it's already over. And at that time, what people were talking about when that recession started was that labor market is very tight. There's a lot of shortages. There were pockets of weaknesses manufacturing as in hiring, and it's hard to get a manual labor. There are decreased demand for temporary workers, but there's also shortages of white collars. So it actually always this, this narrative of labor shortage, tight labor market always existed in the first month of recessions. That's that's so this is why we to us it was not a powerful enough of an argument to push back against a embarraical regularity. That actually, to be honest, I don't think econdoms have a very good understanding about and so if we don't understand why unemployment rate would always jump by another, you know, one point five percentage point after jumping one point zero point five percentage point.

Then it's very.

Then it's very.

Hard to uh deconstruct this argument if you don't even know why it is that way.

Hard to uh deconstruct this argument if you don't even know why it is that way.

So speaking of things that economists might not have a great understanding of. You kind of touched on this earlier. But the other big debate of the moment is this idea of.

So speaking of things that economists might not have a great understanding of. You kind of touched on this earlier. But the other big debate of the moment is this idea of.

Hard versus soft data.

Hard versus soft data.

So the hard data is still coming in relatively strong, although as you point out, maybe it gets revised down later. These surveys, the soft data are pretty bad, at least up until recently. There's been some improvement. But if you were looking at something like the consumer sentiment survey earlier this year, you probably would have thought the recession was already here. How are you squaring those two variables, the soft and the hard.

So the hard data is still coming in relatively strong, although as you point out, maybe it gets revised down later. These surveys, the soft data are pretty bad, at least up until recently. There's been some improvement. But if you were looking at something like the consumer sentiment survey earlier this year, you probably would have thought the recession was already here. How are you squaring those two variables, the soft and the hard.

Yeah, so soft indicator sentiment indicators have not really played a key role in our recession, call for the reason that you mentioned, And I do agree that if you look at the decomposition of the sentiment, it's driven by political party lines. However, I would say that it is important to take into account people's lift experience because ultimately, people's ultimately, and I stress the ultimately people's behavior is a function of how they feel the world is going to be like. And I could understand why sentiment is very poor because you know, the key, the key reason, the key explanation is that price levels are still high. And you know, not only in US, but all around the world. When you look at countries that has suffered from high inflation, what happened is that the relative levels of prices in the economy is completely distorted, and it takes a while for these relative levels to return to normal, even if the growth rate of inflation falls to two percent. In fact, everything is there a different For example, the price of a burger relative to you know, my income is permanently higher. And also, you know, if your heater is broken this winter, you'll be shocked to find out that, in fact, it now costs twenty thousand dollars to get a heat pump versus before the pandemic it was you know, about ten thousand dollars. So many prices actually increased more than thirty percent, forty percent. And I think it's just harder for people to plan for the future. Whenever financial shocks happen. And also if you look at the distribution of the gains from financial asset appreciation during the past three years, it is actually very concentrated in baby boomers. And you know, seventy percent of stocks are owned by people who are older than fifty nine years old. And whereas the people the millennials and general Generation X, what they had in the last three years is actually they saw their debt load climbed. In fact, a consumer credit for millennials rose over thirty percent over the last three years.

Yeah, so soft indicator sentiment indicators have not really played a key role in our recession, call for the reason that you mentioned, And I do agree that if you look at the decomposition of the sentiment, it's driven by political party lines. However, I would say that it is important to take into account people's lift experience because ultimately, people's ultimately, and I stress the ultimately people's behavior is a function of how they feel the world is going to be like. And I could understand why sentiment is very poor because you know, the key, the key reason, the key explanation is that price levels are still high. And you know, not only in US, but all around the world. When you look at countries that has suffered from high inflation, what happened is that the relative levels of prices in the economy is completely distorted, and it takes a while for these relative levels to return to normal, even if the growth rate of inflation falls to two percent. In fact, everything is there a different For example, the price of a burger relative to you know, my income is permanently higher. And also, you know, if your heater is broken this winter, you'll be shocked to find out that, in fact, it now costs twenty thousand dollars to get a heat pump versus before the pandemic it was you know, about ten thousand dollars. So many prices actually increased more than thirty percent, forty percent. And I think it's just harder for people to plan for the future. Whenever financial shocks happen. And also if you look at the distribution of the gains from financial asset appreciation during the past three years, it is actually very concentrated in baby boomers. And you know, seventy percent of stocks are owned by people who are older than fifty nine years old. And whereas the people the millennials and general Generation X, what they had in the last three years is actually they saw their debt load climbed. In fact, a consumer credit for millennials rose over thirty percent over the last three years.

So you know, there's a.

So you know, there's a.

District fuctional aspect to it. And I think if you ask the baby boomers, yes, times are great. What you know, for the younger generation they cannot. They have a hard time buying a house. So I think one way that we could get a sustained soft landing and would be if the baby boomers could transfer their wealth to the millennials to help the debt burden. That is sure if all the old people die, no, just be altruistic.

District fuctional aspect to it. And I think if you ask the baby boomers, yes, times are great. What you know, for the younger generation they cannot. They have a hard time buying a house. So I think one way that we could get a sustained soft landing and would be if the baby boomers could transfer their wealth to the millennials to help the debt burden. That is sure if all the old people die, no, just be altruistic.

Yeah, okay, yes, yes, please give us our inheritance.

Yeah, okay, yes, yes, please give us our inheritance.

Now twenty twenty four, what should we watch for what's going to happen?

Now twenty twenty four, what should we watch for what's going to happen?

Yeah, I think there are are both definitely both positive risk and negative risk. So, as I mentioned, I think that there there might be a chance that a recession in fact has already started late in twenty twenty three, but I don't think any recessions are in because there's this short period of time where if policy makers act on it and you could turn it around. Right, And when I wrote my twenty twenty four outlook, we are our base case is that we think a downturn has started in October, but the FED can still achieve its soft lending if they cut faster and earlier. And in my mind I was thinking if that should be cutting in December and January, And amazingly we did see a great pivot from Powell in the December FOMC meeting, and that is actually the sort of stuff that could staunch the downturn dynamics and turn it all around. And also, of course it helps that you have positive exogenous supply shocks like China slow down, as bad it is to global growth, actually helps Powell's case in that it drives down commodity prices. So but on the negative risk side, I main concern about credit crunch. I mentioned that our models would suggest that the credit sector has not adjusted to FED rate hikes, and it takes time for the rate hikes to hit that sector because first you need the balance sheet cushion of consumers and corporates to be depleted, and then second the downturn a slowed. You don't actually need a negative growth, you just need slow down in revenues for corporates to feel the heat. And then there then you'll see more default and as you see more defaults than you can see lenders pullback or the defaults could also reveal that there is actually some underlying vulnerability, either in the consumer a credit segment, or corporate.

Yeah, I think there are are both definitely both positive risk and negative risk. So, as I mentioned, I think that there there might be a chance that a recession in fact has already started late in twenty twenty three, but I don't think any recessions are in because there's this short period of time where if policy makers act on it and you could turn it around. Right, And when I wrote my twenty twenty four outlook, we are our base case is that we think a downturn has started in October, but the FED can still achieve its soft lending if they cut faster and earlier. And in my mind I was thinking if that should be cutting in December and January, And amazingly we did see a great pivot from Powell in the December FOMC meeting, and that is actually the sort of stuff that could staunch the downturn dynamics and turn it all around. And also, of course it helps that you have positive exogenous supply shocks like China slow down, as bad it is to global growth, actually helps Powell's case in that it drives down commodity prices. So but on the negative risk side, I main concern about credit crunch. I mentioned that our models would suggest that the credit sector has not adjusted to FED rate hikes, and it takes time for the rate hikes to hit that sector because first you need the balance sheet cushion of consumers and corporates to be depleted, and then second the downturn a slowed. You don't actually need a negative growth, you just need slow down in revenues for corporates to feel the heat. And then there then you'll see more default and as you see more defaults than you can see lenders pullback or the defaults could also reveal that there is actually some underlying vulnerability, either in the consumer a credit segment, or corporate.

All right, well, Anna Wog, thank you so much for coming on all thoughts and walking us through your twenty twenty three call and giving us a preview of twenty twenty four as well. Really appreciate it.

All right, well, Anna Wog, thank you so much for coming on all thoughts and walking us through your twenty twenty three call and giving us a preview of twenty twenty four as well. Really appreciate it.

Happy to be here.

Happy to be here.

Thanks Joe.

Thanks Joe.

That was really interesting. There's so many things to pull out of that conversation. I thought the credit market point was an extremely interesting one. People have been talking about the idea of the credit market maybe having a reckoning for many years now, but the idea that maybe you know, the lags between the interest rate hikes and the credit market have somehow changed due to the big maturity takeout that we saw, but also the idea that if revenues start to come down, that's when you could see the crunch point that we're interesting. The idea of the distribution of sentiment. I think that's something that we're starting to hear over and over again, not just in the political sense, so obviously Republicans and Democrats are reporting very different things at the moment, but also maybe differences in ages. If you're a baby boomer with a huge stock portfolio and a house, you're probably feeling pretty good right now. If you're a millennial without that much in stock based savings or any hard assets like houses, then you're probably not feeling so good.

That was really interesting. There's so many things to pull out of that conversation. I thought the credit market point was an extremely interesting one. People have been talking about the idea of the credit market maybe having a reckoning for many years now, but the idea that maybe you know, the lags between the interest rate hikes and the credit market have somehow changed due to the big maturity takeout that we saw, but also the idea that if revenues start to come down, that's when you could see the crunch point that we're interesting. The idea of the distribution of sentiment. I think that's something that we're starting to hear over and over again, not just in the political sense, so obviously Republicans and Democrats are reporting very different things at the moment, but also maybe differences in ages. If you're a baby boomer with a huge stock portfolio and a house, you're probably feeling pretty good right now. If you're a millennial without that much in stock based savings or any hard assets like houses, then you're probably not feeling so good.

Yeah.

Yeah.

I thought there were so many interesting observations there, but I can't talk, so Tracy just say more of the Yeah, you.

I thought there were so many interesting observations there, but I can't talk, so Tracy just say more of the Yeah, you.

Could just say that's a good point.

Could just say that's a good point.

Is a great point, Tracy.

Is a great point, Tracy.

Yeah, thank you.

Yeah, thank you.

I appreciate that. Also, the idea that if we do get a recession soon, it could resemble something like two thousand and one.

I appreciate that. Also, the idea that if we do get a recession soon, it could resemble something like two thousand and one.

We wore to talk.

We wore to talk.

About that recession. We should do an episode on the two thousand and one recession.

About that recession. We should do an episode on the two thousand and one recession.

I would totally be up for it, the idea that people it was one of those recessions where people didn't realize it was happening that much until afterwards.

I would totally be up for it, the idea that people it was one of those recessions where people didn't realize it was happening that much until afterwards.

Nine eleven sort of like woke, you know, that was the moment. But yes, I think that is a really and at that point people like O were really you know, clearly we're going to have this contraction. But I do think that's a really interesting historical recession we don't talk about much, and I do think there's like sort of this interesting question about the lags between when the NBA dates the start of a recession to win the consensus sets in that over in recession, So it's sort of an interesting thing to look back at, like how long it typically takes historically.

Nine eleven sort of like woke, you know, that was the moment. But yes, I think that is a really and at that point people like O were really you know, clearly we're going to have this contraction. But I do think that's a really interesting historical recession we don't talk about much, and I do think there's like sort of this interesting question about the lags between when the NBA dates the start of a recession to win the consensus sets in that over in recession, So it's sort of an interesting thing to look back at, like how long it typically takes historically.

Joe, I think we should leave it there because it sounds painful just listening to you. I apologize, no, I thank you for coming on the show and you know, working it out, but let's leave it there.

Joe, I think we should leave it there because it sounds painful just listening to you. I apologize, no, I thank you for coming on the show and you know, working it out, but let's leave it there.

Let's leave it there.

Let's leave it there.

Okay.

Okay.

This has been another episode of the Oddlots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

This has been another episode of the Oddlots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart follow our guest Anna Along. She's at Anna Economist. Follow our producers Carmen Rodriguez at Carmen Arman, dash Ol Bennett at dashbod and kill Brooks at Kilbrooks. Thank you're to our producer Moses onm For more Odd Lots content, check out Bloomberg dot com slash odd Lots and go to our discord

And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart follow our guest Anna Along. She's at Anna Economist. Follow our producers Carmen Rodriguez at Carmen Arman, dash Ol Bennett at dashbod and kill Brooks at Kilbrooks. Thank you're to our producer Moses onm For more Odd Lots content, check out Bloomberg dot com slash odd Lots and go to our discord

And if you enjoy Odd Lots, if you want us to do an episode on the two thousand and one recession, then please leave us a positive review on your favorite podcast platform for listening,

And if you enjoy Odd Lots, if you want us to do an episode on the two thousand and one recession, then please leave us a positive review on your favorite podcast platform for listening,