INSIDE ECONOMICS

Mark Zandi:                      Welcome to, "Inside Economics." I'm Mark Zandi, the Chief Economist of, "Moody's Analytics." I'm joined by the regular crew on, "Jobs Friday." This is Friday, October 7th. The Employment Report for the month of September just came out not too long ago. And we've got the regulars. Cris deRitis. Cris is the Deputy Chief Economist. And Ryan Sweet, the Director of Realtime Economics. And Dante. Dante, good to have you aboard. I was just asking Dante, "How should I identify you?" and he says, "You never identify me." So, we should just do that again.

                                             But Dante is a wonderful economist, period, but focuses on the labor market. And just to remind folks, came to us via the Bureau of Labor Statistics. So he's got an inside view on all this data. Hey, guys, how's it going? How's everyone feeling today?

Cris deRitis:                       I'm feeling great.

Ryan Sweet:                      The bigger question's, "How are you doing?"

Mark Zandi:                      I'm good.

Ryan Sweet:                      And where are you?

Mark Zandi:                      Well, I am in Singapore. I just rolled in. It's now 10:00 p.m. Is it 10:00 p.m.? No, 10:30 p.m. Singaporean time.

Cris deRitis:                       Twelve hours difference.

Mark Zandi:                      It's 12 hours on the nose. Which makes it easy. I was just in Dubai before that and that's eight hours. And I was in London before that, and that's five hours. That's more complicated. I always get confused with the time zones.

                                             Well, I'll talk about my travels. I was in London the last week when it was just complete chaos. And then this week I've been in the Middle East, where a very different kind of vibe. They're doing pretty well. In fact, probably that's the strongest part of the global economy right now because of the higher oil prices. But of course, when I was there yesterday, or the day before, OPEC announced its production cut, so we can talk about that. But now I'm in-

Cris deRitis:                       Ryan, do you sense a pattern here?

Ryan Sweet:                      Yeah, I'm sensing some causation here. Yeah.

Cris deRitis:                       [inaudible 00:02:13] I'm really hearing about Singapore problems.

Mark Zandi:                      Yeah, you're right. Everywhere I go. We'll see how it goes here in Singapore. And then my last stop is in Tokyo. That should be interesting. Headed toward Tokyo, and then I'll be home. Can't wait. Can't wait to get back to the United States of America.

                                             But, a lot to talk about today. But first up is the jobs' numbers. And, Dante, would you mind? Can I ask you to run through the numbers and give us a sense of how you view the numbers?

Dante DeAntonio:           Sure. I think all in all it is a good Jobs' Report. It's not as rosy as it's been in recent months, but I think in some sense that's a good thing. Job growth continues to moderate. We added 263,000 jobs in September. The unemployment rate ticked down by 0.2 percentage points to 3.5%. It's matching. It's low since the pandemic started.

                                             Labor force participation. Down a little bit, which is probably one of the more problematic things in the report. Still waiting for participation to really tick up. I know we backtracked a little bit in September. Job growth is still broad-based. We start to see a little bit of weakness creeping in, in some expected places, I think. Financial services, payrolls pulled back a little bit. And that's mainly housing market related.

                                             A little bit of a pullback in transportation and warehousing, as you've got a little bit of reduction in goods demand happening. Government was weak, but that's mainly a seasonal issue in local government, education, payroll. So the timing of teachers coming on and off payrolls coming back to school. But all in all, job growth is still broad based across industries. Wage growth is still strong. Which again, is not necessarily a positive in light of everything else that's happening with The Fed. It's a good report.

Mark Zandi:                      Well, I don't know. I find it mind-numbing kind of report. Because we're in a world of, good news is bad news, bad news is good news. And you kind of said it wasn't quite as rosy. Meaning, job growth was slower than it has been. But maybe that's a good thing. Because in a world of full employment, and we're definitely full employment, 3.5 unemployment rate. High wage growth, 5%. And obviously, very high inflation, 8% plus. That would suggest that we need to see some moderation in job growth.

                                             So in this case, good. If its good news, meaning strong job growth, that's bad news. Because that means we're going to make less progress on getting the inflation down to a place where we all feel comfortable with that. And can allow The Fed to stop tightening policy.

                                             So which is it? If you're looking at it through the prism of, "What does it mean for a slowing labor market, job market wage growth, getting inflation in. Getting The Fed to stop raising interest rates." Is it good news? Is it bad news? How do you view it?

Dante DeAntonio:           I think it's probably middle of the road. I actually think it's probably not moderating as fast as we would like it to. So I think in that sense, it's probably not great news. Because underlying growth, the top line number was 263. But if you take out the government volatility there, underlying growth is still probably around 300,000. Which is obviously, much stronger than it was pre-pandemic. And much stronger than we need it to be, to keep pace with population growth and labor force growth. So I think in that sense, even faster moderation would be good news for The Fed.

Mark Zandi:                      Yeah, Ryan? So, Ryan, want to fill in any holes there in Dante's quick synopsis and give us your interpretation of the numbers?

Ryan Sweet:                      Yeah, I mean the unemployment fell for the wrong reason. More people left the labor force. The labor force participation rate. I mean if you adjust it for population and demographics, it's roughly where we would expect it to be. So I'm not too concerned about that.

                                             But to your point, the job market's not slowing fast enough for The Fed. And I think why markets are selling off today, is that 75 looks pretty much guaranteed. We get the CPI, the Consumer Price Index next week. That's going to seal the deal between a 50 or 75 basis point rate hike. But the job market is still too hot for The Fed.

Mark Zandi:                      Yeah. Well, okay. I thought that before today's numbers, the markets is, as implied by the future's markets for the federal fund rate target. The rate The Fed controls. Was anticipating or pricing in with a pretty high probability. A 75 basis point-

Ryan Sweet:                      They were.

Mark Zandi:                      A three quarter percentage point increase in the funds rate in November. A half a point increase at the December meeting and then a quarter point rate increase early next year. And then they would stop. And that would for a while, and take a look around that. Before today's numbers, that seemed to be, at least last time I looked. That was what the markets' investors were saying. Is that right?

Dante DeAntonio:           I think it's a little higher than that.

Cris deRitis:                       It's a little terminal.

Dante DeAntonio:           Yeah, the terminal rate is getting up to 4.7% now.

Mark Zandi:                      Yeah.

Ryan Sweet:                      But if you just follow through on what just said, that gets you the terminal rate of 4.75. I mean 4.5 to 4.75.

Dante DeAntonio:           I think you need one more hike in there.

Mark Zandi:                      Oh, do I? Okay.

Cris deRitis:                       We're not going to beat you up too much, Mark. You've been flying a lot.

Mark Zandi:                      The funds rate right now is what? It's?

Dante DeAntonio:           300 to 325.

Mark Zandi:                      Oh, 325. So if I had another 50 basis... No, 150 basis points, that gets made to 4.75.

Dante DeAntonio:           Yeah.

Mark Zandi:                      Well I'm right. Aren't I right?

Dante DeAntonio:           You said 75, 25, 25?

Mark Zandi:                      Oh, no, no, no. I said 75, half a point and a quarter point, 75 total.

Dante DeAntonio:           Oh okay. All right, I apologize.

Mark Zandi:                      Yeah.

Dante DeAntonio:           Yeah. You're right. Okay.

Ryan Sweet:                      Yeah.

Mark Zandi:                      I don't get sleep and I'm still right.

Ryan Sweet:                      Yeah, we're making some [inaudible 00:08:09].

Cris deRitis:                       Yeah. We're going to have to go back and revisit the tape there.

Ryan Sweet:                      Yeah.

Mark Zandi:                      Yeah. Well, Ben, Bruce, or go when you have a chance, go back and rewind. I think I said that. But anyway. Well that's what the markets-

Dante DeAntonio:           You probably did.

Mark Zandi:                      ... we're expecting before I thought. And they're still expecting that? Or are they, I guess with greater-

Dante DeAntonio:           That's still there.

Ryan Sweet:                      It's still there.

Cris deRitis:                       It's still there.

Mark Zandi:                      I guess maybe it's one of those deals. Where investors were kind of sort pricing or hoping that we get... Everything looked good in the report to suggest The Fed could maybe take their foot off the accelerator a little bit, and not follow through on that. And they got disappointed.

Dante DeAntonio:           No, I think people got it encouraged by the JOLTS data, the Job Opening and Labor Turnover Survey. Where we got a big drop in labor demand, so the number of open positions fell. So I think there was some growing hope maybe, that The Fed can dial back. But I think today's new data kind of squashes that.

Mark Zandi:                      Yeah. Okay. All right. Any Ryan? Before I go to Cris, anything else in the report you call out?

Ryan Sweet:                      Well, my favorite number. [inaudible 00:09:18] age deployment to population ratio. It's North of 80. I don't think it rose.

Mark Zandi:                      Did it go up or go down?

Ryan Sweet:                      Ticked down by a 10th.

Dante DeAntonio:           10th, yeah. But still remains North of 80.

Mark Zandi:                      Yeah, no, no, no. Wait. It's 80.2?

Cris deRitis:                       Correct.

Mark Zandi:                      So I mean, 80 is kind of the rule of thumb for full employment. So 80.2 is rightful employment, but it doesn't feel like we're-

Cris deRitis:                       Yeah.

Mark Zandi:                      At least [inaudible 00:09:46].

Dante DeAntonio:           Well past it.

Ryan Sweet:                      Yeah. Okay.

Dante DeAntonio:           That's kind of the sweet spot.

Mark Zandi:                      Right. Cris, what about you? What's your, you want to fill in any holes in the numbers? And what's your sense of the report?

Cris deRitis:                       What's my take? No, at any other time, this will be a great report. We say, "Oh, much faster than what we need for population growth." But at this time of course, it's negative. I think what The Fed focuses on is the wage growth. So 5% average ALI earnings is still too hot. I think it moderated a bit from 5.2% growth. But still, that's too hot. And they're going to look at the ECI, Employment Cost Index, to make that final determination. But I think 75 BPS at this point is sealed in.

Mark Zandi:                      Yeah. Okay. I mean, the way I look at it, the report and why it's so confusing. And why you can, depending on which angle you look at it from, you get a different sense of it. Is there's labor demand and then there's labor supply. On the labor demand side, and this is what businesses are demanding workers. That seems to indicate that, that's slowing. So job growth is slowing. We can debate what underlying job growth is abstracting from the vagaries of the data but it feels like it's about not quite half of what it was back in the summer. We're getting 500,000 plus. In fact, last year I saw this in the report. I think the average monthly job growth in 2021, was like 560,000 or something like that. We're down to something like 420,000 so far, in 2022. And it feels like we're, this Dante said probably around 300k right now. So we're definitely moving in that direction. And then you add to that the Job Opening Labor Turnover Survey data that Ryan, you just mentioned, JOLTS. That big decline in unfilled open positions. I'm sure that the case, I'm sure there's some-

Cris deRitis:                       Oh yeah. Definitely.

Mark Zandi:                      ... statistical. But regardless, I mean that's very few changes in economic data are statistically significant.

Cris deRitis:                       That was.

Mark Zandi:                      That was. That was statistically significant. And my guess is, that a lot of those other unfilled positions that are still there that are kind of above what you typically see. They're probably soft unfilled positions. I bet they're going to start evaporating here pretty quickly. Just like they did in the last month. So it feels like labor demand... If I just looked at labor, the labor demand side of the report. I'd say, "It's pretty good, it's actually damn good." I mean the labor market is throttling back in an orderly way, and we're moving in the right direction.

                                             You take the trend lines. By early next year will be sub 100,000 job growth. And that's consistent with unemployment moving North. And labor market pressure's easing, and wage growth law. But the problem, the reason why markets investors are so anxious. And why at the moment, stocks are selling all long term, interest rates are up, is labor supply. Because on the labor supply, that was disappointing. Labor force participation declined. Not a lot, it went from I think 62.4 to 62.3. And that is not statistically significant. I mean that bounced around. But unemployment then fell from 3.7 to 3.5. And everyone's now focused on, we need unemployment to start moving North. To get that to signal that wage, that labor market's becoming less tight. And that wage growth will start to moderate inflation can come in. The effect could stop raising interest rates. And that's the disappointment in the report. So, it depends on which part of the labor market elephant you're touching. You get a different perspective on things and why it's so confusing. Does that... People, what do you think of that frame, thinking about it? Ryan?

Ryan Sweet:                      No, I would agree with you. I'm confused about the elephant reference.

Mark Zandi:                      Oh.

Ryan Sweet:                      How do we market elephants?

Mark Zandi:                      Well-

Ryan Sweet:                      There's another Zandi-ism.

Mark Zandi:                      Hold up. Wait. You've heard that phrase. "If I touched the trunk of the elephant?"

Ryan Sweet:                      Yeah.

Mark Zandi:                      I think, "Blindfold or touched the rear end. I've got a different perspective on that elephant."

Ryan Sweet:                      I gotcha.

Mark Zandi:                      Okay. Okay.

Ryan Sweet:                      All right.

Mark Zandi:                      Dante, what do you-

Ryan Sweet:                      No, I would agree with you.

Mark Zandi:                      Oh, you would agree you would with that?

Ryan Sweet:                      Yeah. I think everything you said was spot on.

Mark Zandi:                      Okay. Dante?

Dante DeAntonio:           Yeah, I agree. I think the JOLTS, jobs openings data is just a little bit hard to make sense of right now. One, because you had such a big decline. You've had an even bigger decline over the last four or five months. Openings are down 1.8 million or so, since March. But they're still historically high by a wide margin. So you've had this huge reduction, but they're still incredibly elevated. And we've never had a period over four or five months where openings are coming in while job growth is strong. In the 20 years of data that we have on job openings, that they've only ever really had a sustained decline when we're already in a recession. When job growth is declining. So we've never seen, we have no historical precedent for this idea that we actually have labor demands, sort of getting pulled in without job growth also falling. And so I think it's hard to really understand what that means, and if it is something we should take seriously.

Mark Zandi:                      Yeah.

Ryan Sweet:                      One thing I would add is that we still have that path to soft landing for The Fed. Because I think how I'm kind of charting whether or not we're still on that path, is looking at the beverage curve. Which is the relationship between job openings and the unemployment rate. And The Fed wants it to fall straight down. And the JOLTS state is through August. So it shifted out. But with the decline in the unemployment rate, it likely moved back into where The Fed wants it to be. So we're still, it's possible. I'm skeptical. But still there is that path to a soft landing.

Mark Zandi:                      Yeah. Cris? That frame is [inaudible 00:15:58]-

Cris deRitis:                       Yeah.

Mark Zandi:                      ... supply.

Cris deRitis:                       No, I'd agree with that. I think that path is quite narrow.

Mark Zandi:                      Very narrow, but the-

Ryan Sweet:                      Yeah, but they still exist.

Mark Zandi:                      I don't know.

Ryan Sweet:                      And the labor market data is lagging here. So I think the openings is the more relevant statistic to be focused on, if measured properly. Versus the employment.

Cris deRitis:                       And the JOLTS state is not like that much. It's through the end of August. So it's only roughly two week difference between the day that we got this morning. Which the reference week includes the 12th of September, versus the end of August. So it's more. The issue is more the measurement. Hard versus soft. Is it really an opening? Is it not an opening?

Mark Zandi:                      Yeah. I'm confused by what you said though. I mean-

Dante DeAntonio:           Yeah, what-

Mark Zandi:                      ... the job openings lead job growth. The decline in the job opening. So what is that? Job openings are coming down rapidly.

Ryan Sweet:                      That's the positive sign. That's the number I would focus. If I have to choose between looking at the unemployment rate or payrolls, versus the openings. I think the openings is the more indicative number at this point, of where we're headed. Where-

Mark Zandi:                      Isn't that suggested that, that's consistent with a path forward. Where the labor market eases, wage growth slows, inflation comes in. And we don't have a recession, isn't it?

Ryan Sweet:                      It's in that direction, but-

Mark Zandi:                      Not [inaudible 00:17:17] your mouth. I know, but-

Ryan Sweet:                      No, no. It's in that direction, but it's not enough. Even 10 million job openings at this point, is far too much. So it's good that it's coming down. But I don't think it's enough for The Fed to change course at this point, or ease up.

Mark Zandi:                      Right. I mean I hadn't had, because I've been traveling. I haven't had a chance to dig deep into the job openings numbers. Was the decline in job openings broad based across industries, do you know? Or was it concentrated?

Cris deRitis:                       Yeah, Dante wrote up a piece on economic view about this.

Dante DeAntonio:           Yeah, it declined in almost every industry. Obviously, some declines were bigger. But I think construction was the only major industry where openings actually increased. Which was a little bit surprising to me. But I think [inaudible 00:18:03]-

Ryan Sweet:                      That's weird.

Dante DeAntonio:           Yeah.

Ryan Sweet:                      That's very weird.

Dante DeAntonio:           For everyone else.

Mark Zandi:                      I'm sorry. Everywhere else it was down?

Dante DeAntonio:           Mm-hm.

Mark Zandi:                      Okay. I mean, one narrative would be that we saw this surge in job openings when the economy reopened about a year ago. A little over a year ago now, with the vaccination and the end of the worst part of the pandemic. It's felt like every business in the country put up a, "Help Wanted," sign at exactly the same time. So that wasn't surprising. And then businesses, the liberal market is tight. The unemployment rate is low, which is 3.5%. The employment to population ratio for prime age workers is 80% plus. That's consistent with a strong economy.

                                             So you keep those open positions open, until it's clear that you don't need them. And that's happening right now. It started happening at the beginning of the year, but now it's very clear that in many of these industries you just don't need those open positions. And they're evaporating as fast as they were put up. And if that's the case, then that would be consistent with the ability of the labor market to ease up here. And wage growth to roll over. And we get that path forward without going into [inaudible 00:19:37]. With The Fed having not having to go on the high alert and we find our way of soft landing. Does that narrative-

Cris deRitis:                       That's possible. Yeah, that's the narrative. It's possible, but I just think it's unlikely.

Mark Zandi:                      And why?

Cris deRitis:                       Well, it's a very narrow path to fight inflation, on the one hand. You're looking at the inflation data. You're going to hike because the inflation is still way too high. And have that calibrate sufficiently that you remove just the open positions without doing damage to the actual labor market. Without actually having layoffs, mass layoffs. I just find that the likelihood of overshooting is quite high.

Mark Zandi:                      Yeah. But go back to that narrative. That narrative is just centered around the pandemic. And the pandemic And what's weird or unique, is the fact that the economy was shut down, reopened and everyone put up these, "Help Wanted," advertisements. Opened these positions up. And getting them back. They went from low to high in a very short period of time, a few months. And what I'm arguing, is it's going to come in as fast. It's going to come in as fast. Because you just don't need them now. The economy's starting to slow and labor market. So those open positions we're going to evaporate.

Cris deRitis:                       But we'll see.

Dante DeAntonio:           I think we're on your path, your narrative. We're currently going through that. I think Cris is just saying we're going to get pushed off that path pretty soon.

Mark Zandi:                      Yeah.

Cris deRitis:                       Well, if job openings are falling that fast, what's the mechanism that stops the free fall at the right moment? That's what, yeah. So if businesses that worried, they're pulling back that quickly on openings. What stops that ball from dropping past where we want to? That's just the thing I'm not sure about.

Mark Zandi:                      It's because those open positions weren't really that open any... I mean they're sitting there. They were just sitting there. Because I had to put them up. I needed people to come back to work. I posted those unfilled positions back when the economy reopened. And they're just kind of sitting there. So it's not a reflection of it as tight of a labor market as you think it does. You see what I'm saying?

Ryan Sweet:                      Yeah. And it don't need to lay offs.

Cris deRitis:                       We lose these half position, these [inaudible 00:22:06] open position. But then once we lose all those, then we stop. Is that [inaudible 00:22:09]?

Mark Zandi:                      That doesn't mean the same thing as the fact that they rose to such a high degree. Doesn't mean the living market was as tight as that would suggest. Here's the other way of putting it. That the unemployment rate at 3.5% ,and the employment to population ratio at 80%, is actually the really good measure of where the labor market is. It's not any tighter than that. That's how tight it is. And that's tight. And you got to slow the economy. But that's kind of typical tight at this point, when you're in a business cycle. It's not like excruciatingly tight, which is what you would conclude by looking at the number of unfilled positions. That's what I'm saying.

                                             So it's not, therefore, it's still a hard path. I'm not arguing that. Because even in a, if it's typical kind of tightness, getting the economy to slow on queue is not easy. But it's not as difficult as it might appear by looking at those unfilled positions. That's the argument I'm making. But we'll see here.

Ryan Sweet:                      I don't know.

Cris deRitis:                       We're at the moment at the of truth, aren't we?

Ryan Sweet:                      Absolutely. The next few months we're going to-

Cris deRitis:                       The next few months.

Ryan Sweet:                      Yeah.

Cris deRitis:                       I wonder if the issue is-

Ryan Sweet:                      Travels are coloring your views here.

Mark Zandi:                      Well, actually, I've seen extremes here overseas. I mean I go to the UK. You go to the UK, that is at one extreme, in chaos. I mean of course, with the new prime minister, she came forward with this fiscal package. That was deficit finance tax cuts and spending increases in a world, where the labor market in the UK, is arguably tighter than it is in the U.S. It's well beyond full employment by traditional measures, the unemployment rate. And of course a lot of concern about the economy overheating. And then the fiscal sustainability of the deficit financing, given all the magnitude of the stimulus.

                                             And then you of course, the chaos that trigger triggered because of the rise in guilt yields made life very difficult for pension plans here. Because of some approach they took to managing their liabilities. All kinds of unintended fallout from all of that. So complete chaos in the UK. But then I go to the GCC, the Gulf Coast, I was just in Dubai. And they're doing fine. No problem. Life is good and there are cranes everywhere. So I've seen both sides of the global economy at this point.

Ryan Sweet:                      So you mentioned we're at like the next few months are going to critical, but it's going to be difficult to separate the signal from the noise and the data because Hurricane Ian is going to because a lot of problems with the employment data.

Dante DeAntonio:           Because job [inaudible 00:25:01]-

Ryan Sweet:                      [inaudible 00:25:01] was going to spike. They're going to spike. But you can separate that. You can do UI, U.S. minus Florida. But some, it's going to just add some volatility and it's going to make things a little bit messier to interpret.

Mark Zandi:                      What about these job numbers? Will it affect, because it's this by the survey week, which is next week for the month of October. Is it going to [inaudible 00:25:25] jobs or hurt jobs?

Ryan Sweet:                      Or let's see what UI does.

Mark Zandi:                      Okay. I think [inaudible 00:25:31]-

Cris deRitis:                       I would say a little bit. I mean the timing is more, it's not going to be as big of an impact would've been if it hit now or a few days from now. But I think it's still going to have a negative impact, at least in Florida.

Mark Zandi:                      Negative-

Ryan Sweet:                      In the past? Yeah. In the past we've looked at the timing of storms. If it hits during the reference week, it's significantly disruptive to the employment date. But it hits before it's less, it still leaves a mark, but it's not enormous.

Cris deRitis:                       But back to your opening point, it may artificially make the employment numbers look a little low next month, which may make us too optimistic. I mean, that's actually what we want to see. So it may be a false sense of security that the job market is slowing more than actually is.

Mark Zandi:                      You don't think the reconstruction will be kicking in by then and that will create jobs?

Ryan Sweet:                      Just clean up. Only the cleanup would be.

Dante DeAntonio:           It takes a little bit longer I think, before that starts to really manifest.

Mark Zandi:                      Right. Yeah. Because are any, I guess tourist spots are disrupted. And I guess there'll be layoffs there. And those folks won't be back to work in time.

Cris deRitis:                       There's going to be some business closures. I mean the BLS may have mentioned that it didn't affect this, which isn't surprising after the reference week. But they put a direct message in the report about Ian.

Mark Zandi:                      Right, right.

Dante DeAntonio:           The Fed meets before the next Employment Report though.

Ryan Sweet:                      They meet-

Cris deRitis:                       November 2nd.

Dante DeAntonio:           Yeah, I think it's the second.

Ryan Sweet:                      Yeah. So-

Cris deRitis:                       That's true.

Ryan Sweet:                      Yeah.

Dante DeAntonio:           They won't have this BLS.

Cris deRitis:                       That's why next quarter PI number is-

Dante DeAntonio:           We'll have ECI though for the third quarter, which is the end of October.

Cris deRitis:                       Yeah, I think that's more relevant.

Dante DeAntonio:           And if you look at the quits rate, the ECI is going to be strong.

Mark Zandi:                      Yeah, you want to explain that Ryan?

Ryan Sweet:                      Yeah. So the quits rate does a pretty good job of predicting what the Employment Cost Index for wages is going to be in the following quarter. Because if you look at the Atlanta Fed Wage Tracker, where a lot of the wage growth cases for people that are quitting their jobs. In-between jobs and things like that. So that's where we're seeing the strongest wage growth. And that with a quits rate, this elevated, The Fed's going to continue to press hard on the-

Dante DeAntonio:           Brakes.

Ryan Sweet:                      The brakes, because they need wage growth to slow, to pull down the demand inflation that we're experiencing. But I'm with you, Mark. I don't know if your view has changed, but our inflation problems are still on the supply side. And The Fed can't do anything about that.

Mark Zandi:                      Well, I mean they got to get labor. Well, I mean they can get labor demand down. I mean even-

Ryan Sweet:                      If they can do that.

Mark Zandi:                      ... objectively speaking. Labor demand is still strong, relative to kind of trend labor supply. Trend labor supply is 100k per month, roughly. In jobs. And we're creating even today, even in the month of September, 260k. So objectively, they can get that down. That's what they're working to do.

Cris deRitis:                       But I think there's some good signs on the supply side. So the supply delivery times and the ISM Manufacturing Survey came in. And that's just another indication. Shipping rates are come down a significant amount in the last few weeks. So that's a sign that the supply chain stress is starting to ease. We should get some more good disinflation over the next few months.

Ryan Sweet:                      Yeah. Which we need.

Mark Zandi:                      Yeah, well we definitely need it.

Ryan Sweet:                      But in need of any of oil.

Mark Zandi:                      What's that?

Ryan Sweet:                      Then you have oil. OPEC cutting. Oil prices going back up, gas prices going back.

Mark Zandi:                      Maybe we should, well let's go maybe complete the discussion around the jobs. And then let's turned to oil. But when I saw the numbers this morning, and I was on a plane. And thank you Ryan for sending me the email on the plane. Because I couldn't get on-

Ryan Sweet:                      Anytime.

Mark Zandi:                      ... the internet to see it. I thought, "Oh." I thought the markets would be kind of mixed. Because the labor and demand is very positive from a market perspective. And labor supply is negative. I didn't expect this strong negative reaction from markets at least alone. And of course, this early in the trading day and we'll see how it ends up. But nonetheless, I was a little surprised by that.

Ryan Sweet:                      It's also after some rallies this week.

Mark Zandi:                      Okay. So it's just normal market volatility is what you're saying.

Ryan Sweet:                      It might be giving up some of gains [inaudible 00:29:48].

Cris deRitis:                       Random walk.

Ryan Sweet:                      Yes.

Mark Zandi:                      Right. Okay. All right. Well, at this point, if we continue to see job growth throttle back. So end of this year going into next, we're around 100k. And unfilled positions continue to move South as they have been since the beginning of the year. No more, no less. And the quit rate continues to moderate. Still very high, but it is more or less moderating if you look through the monthly volatility. I guess the next thing that has to happen, which hasn't happened. Goes back to your point about wage growth that has got to roll over. [inaudible 00:30:31] reading. If we're thinking about this in the context of The Fed's path. The path to inflation back at target without having to go into a recession, that's the next thing that's got to happen here. We've got to see that this wage gross numbers start to throttle back.

Ryan Sweet:                      Okay.

Mark Zandi:                      Anything else on the job numbers you want to call out?

Cris deRitis:                       I think we covered a lot of ground.

Mark Zandi:                      No?

Dante DeAntonio:           Again, outside of the current situation that it was a good report. U6, the broader unemployment rate is back down to its all-time low. The demographic unemployment rates are quite low. Black unemployment is down. So there's a lot to celebrating in the report from a household perspective. So I think the market remains strong from that standpoint.

Mark Zandi:                      Yeah. From the thought of workers, thinking about, "I've got a job." But yeah, it's a positive. But in the current context. It just goes back to that mind-numbing, "Good news is bad news, bad news is good news," kind of thing. Okay. That's right. Yeah. Let's talk about oil a little bit. Because that obviously is also very important to the inflation outlook and what The Fed's going to do. And the big news here, and I was in the GCC in the Gulf, in the Middle East. When OPAC Plus decided to cut its quotas. Did you guys have a take on that? Do you have a view on that? I mean, pretty strong comments coming out of the administration and other politicians in Washington. Do you guys have a perspective on any of that? What's going on there? Cris, do you?

Cris deRitis:                       Yeah. I think obviously, everybody looks out for their own interest. So the fact that they cut is not terribly surprising. All producers want to keep oil prices high. Obviously. In part, you could say it's a reaction to the actions taken by the U.S. In terms of the Strategic Petroleum Reserve releases there. From the oil producer's perspective, they might look at that as manipulating the market. And they're just responding to that increase in oil on the market, with reductions on their side to keep the price elevated. So I'm not shocked by the actions here. Obviously, it's not in the U.S.'s interest for these prices to remain high. But for the OPEC producers, it's not unexpected that they took this action.

Mark Zandi:                      Yeah.

Cris deRitis:                       That's my take.

Mark Zandi:                      Yeah, I would concur with that. I guess I can understand from a political perspective, why-

Cris deRitis:                       Of course.

Mark Zandi:                      ... they might get bashed. Because obviously, this means higher gas and lie prices and that's politically charged. It's particularly as you move into the midterm election, which is less than a month away. And there may be some political aspects to what OPEC did, OPEC Plus did. But it feels like I agree with you. It feels more just self-interested. I mean oil prices were coming in. We were closing in on $80 a barrel a week ago, before all this talk about an OPEC plus cut came to the fore. And I don't think that from a OPEC perspective, a Saudi perspective, a UAE perspective. That I think they feel more like it's in their best interest of oil sitting around 90, as opposed to 80. Because 90, I get obviously, more revenue, but I'm not killing demand. I'm not going to crush the global economy.

                                             But if that's kind of the sweet spot for prices. So if you look at it from that perspective, their perspective on trying to maximize their revenue. Which that is what it is. 90 seems about right. So they cut quotas. And you can calibrate it because the announced cut was 2 million barrels a day. So they're going to cut quotas by 2 million barrels a day of production. But because many of the OPEC members weren't producing at their existing quota, the actual cut in output is closer to a million barrels a day.

Cris deRitis:                       Exactly.

Mark Zandi:                      A million. And if you do, our rule of thumb is, "Every million barrels a day is worth $10 on a barrel of oil." What they did is, they took oil from 80 bucks a barrel to 90 bucks a barrel. So that's what they did. And it just feels, again, from if you're sitting in their shoes, they're standing in their... What's the phrase? Standing in their shoes. Standing in their shoes. You kind of get it, that's what you would do. Dante? You're actually shaking your head. Do you have a different view?

Dante DeAntonio:           No, I agree. It makes sense. I mean from that perspective, it makes sense to me.

Mark Zandi:                      Yeah. Here's the other thing.

Dante DeAntonio:           It's a small amount off GDP Bureau in the U.S. though. [inaudible 00:35:54].

Mark Zandi:                      The point about inflation though is [inaudible 00:35:55].

Dante DeAntonio:           Oh no, I agree. It's more about inflation, but-

Mark Zandi:                      It's not about growth at this point. I mean-

Cris deRitis:                       In the U.S., it's a major producer.

Mark Zandi:                      Yeah.

Cris deRitis:                       There are beneficiaries in the U.S. from higher prices as well.

Dante DeAntonio:           That's a good point.

Mark Zandi:                      Right. I mean if you look at the model of the global economy, if you shock it by $10, you raise oil prices by 10 bucks. What does it do to GDP in a subsequent year? I think it's about a 10th percent off.

Dante DeAntonio:           A 10th.

                                             Yeah. So pretty minor.

Mark Zandi:                      But it goes right to consumer sentiment psychology. It goes right into inflation. We're seeing inflation come in because of the lower oil prices and food prices. And now that now it's going up, so doesn't feel very good. I will say though, in our forecast for oil prices. And here I'm focused on West Texas Intermediate. We have been assuming $90 barrel oil, through this year going into next. So our forecast has not changed. And now we didn't exactly forecast OPEC cutting like this. But if OPEC didn't cut, then other things would've happened. It kept, keep prices up. So I don't know that it's, even with this move, it's far off of what we were thinking, at least, in terms of the pricing going forward.

                                             And here's the other thing. This all assumes the global economy doesn't go into recession. I mean if the global economy goes into recession, and it's not, at least by our calculation, is close. But it's not in recession. If it goes into recession, global demand will weaken and you'll get prices back. Even you'll be in the 80s again, not 90s.

Dante DeAntonio:           Okay.

Mark Zandi:                      All right. I mean obviously, not great from an inflation perspective and trying to land that plane on the tarmac. Makes it landing even more difficult. But I don't think it's very different than expectations. The expectations we've been having, we've had all along. Okay, let's play the game. Let's play the statistics game. And I'll have to admit, I've been recently relatively unprepared for this game.

Cris deRitis:                       We'll give you a mulligan.

Mark Zandi:                      Well, you will give me a mulligan?

Ryan Sweet:                      Oh yeah, of course. When you're traveling this much, we're at... The expectation. The bar's lowered.

Mark Zandi:                      The bar's lowered for me. Okay, I'm good with that.

Ryan Sweet:                      Yeah, I mean the bar's raised for Dante, since he's been... Yeah. But for you, we can lower it.

Dante DeAntonio:           [inaudible 00:38:15] at a time. Crunch the numbers.

Ryan Sweet:                      And Dante, you are prepared. You've been thinking about it.

Dante DeAntonio:           You've got a number. Yeah.

Mark Zandi:                      Okay, you've got a number. Okay, good. All right. So the game. Statistics game. We all put forward a statistic. The rest of the group tries to figure that out with the clues, questions, deductive reasoning. The best statistic is one that's not too easy that we all get it so quickly. You guys got the cowbell ready just in case? And not too hard. There you go. Not too hard that we can't get it and it's got to be a... Well, it doesn't have to be, but it'd be nice if it's apropol to events. What's going on now? Recent statistics. So with that, let me turn to Dante. Dante, you're going first for everything in this podcast. So which was your statistic?

Dante DeAntonio:           It is minus 2,000.

Mark Zandi:                      Okay. Is it in the Employment Report?

Dante DeAntonio:           It is in the Employment Report.

Mark Zandi:                      Is it in the payroll circle?

Dante DeAntonio:           Yes.

Cris deRitis:                       So it's a change in job growth income sector? Industry?

Dante DeAntonio:           Yeah.

Ryan Sweet:                      It is a change in industry jobs.

Mark Zandi:                      So some industry lost 2,000 jobs in the month of September. And you want us to figure that out? That's your statistic.

Dante DeAntonio:           It's important. Yeah. It's important for labor supply conversation we were having.

Mark Zandi:                      Childcare, it's women and job care.

Dante DeAntonio:           I teed it up for him. He said, is travel late?

Mark Zandi:                      That's impressive.

Cris deRitis:                       Wait, these other two guys didn't get it as fast as I got it though.

Ryan Sweet:                      Yeah, we were going to get there.

Mark Zandi:                      Oh yeah. Well maybe five minutes down the road you'd get there.

Ryan Sweet:                      Yeah.

Mark Zandi:                      Come on. This-

Cris deRitis:                       All right, all right.

Mark Zandi:                      Okay.

Dante DeAntonio:           Yeah, was a little-

Ryan Sweet:                      Was it the half of the their [inaudible 00:39:53].

Dante DeAntonio:           I'm surprised Mark didn't travel with his cowbell.

Mark Zandi:                      I did travel with my Lume Cube. But I couldn't put the cowbell in there.

Ryan Sweet:                      Yeah.

Dante DeAntonio:           What's a Lume Cube?

Mark Zandi:                      You know what Lume Cube is? Lume Cube shines a light on your face. So if I do a TV interview, I can do TV interviews from anywhere. In fact, I did one yesterday. In a CNBC Arabia, I think they call it. It's in Arabic. Not that I speak Arabic, but it was translated. So it was pretty cool. In fact, the hardest. I did an interview with CNN. The hardest interview I did all week was CNN. It was about the OPEC cuts. And the first question was, "Do you think that OPEC is weaponizing oil?" That was the question. I go, "Oh, gosh."

Dante DeAntonio:           Wow. That's a good way to start an interview.

Mark Zandi:                      That's a good way to start interview. I'm afraid to go back and look at what I said. But anyway. So, why'd you pick that number? Why that statistic?

Dante DeAntonio:           Yeah, so obviously we've been talking a lot about labor supply as the big thing that we're waiting to see come around. And I think one of the issues still out there, is that employment and childcare services is still something like 8% lower than it was before the pandemic. There's still shortages in available childcare for parents who are looking to get back to work. I think we know from other data that there are some people out there. The number of people that are out of the labor force but want a job is still elevated by, I think 800,000, relative to what it was in early 2020.

                                             So there's still some set of people, whether it's a half a million or a million people. That are sitting out there saying they want a job and there's some reason they're not coming back. And I think one of those key reasons is still, childcare issues are still problematic for a lot of people in terms of costs and availability. And those are obviously directly linked to one another. So we had seen some improvement in childcare service employment. And it's not a big pullback in September, but it's moving in the wrong direction in terms of providing any support to labor supply.

Mark Zandi:                      Yeah, I got distracted there for a second, I may have missed it. But what's going on? Why can't these childcare silly centers stand up? I mean, is it simply can't find people at prevailing wages? Is that what it is?

Dante DeAntonio:           Yeah. I assume it's a combination of, there's obviously no flexibility in work arrangement. Like a lot of other jobs can offer. You have to be there in person. You have to be around potentially children. The wages are not great. They've improved, but they're still not great relative to other available positions. And I think given how many job openings we still have, there's just a lot more competition for limited pool of workers.

Mark Zandi:                      Oh, that's interesting. I didn't think of that. I know in times past, you look at labor force participation by different demographic groups. And you looked at the participation rate of young parents, both male and female. And they did decline quite a bit. And it wasn't until schools reopened that they sort of came back. And that was about a year ago now, when schools really reopened. In September of 2021. Have you looked at that data recently? You know what it's saying?

Dante DeAntonio:           I have not updated it recently, no. I mean it had come most of the way back, not long after schools broadly reopened. I think there was still a little bit of weakness across parents. Particularly of young children, sort of less than six years old. Which would point to the daycare story more than the school reopening story. So I think there's probably still some evidence there, at least the last time I looked. That daycares in particular, were still having a little bit of an impact on the ability of parents to work.

Mark Zandi:                      But do you still think... This is going back to labor force participation it's down about a point from a pre pandemic. Do you think? And suppose, there was no issues with childcare and parents finding the help they need. How much would that really add to the participation rate? We're not talking half a point or we're talking like a 10 or two? Something like that.

Dante DeAntonio:           Yeah, I would lean more towards a 10. So I think it's one of the factors. It's not sort of the majority factor by any means, I don't think.

Mark Zandi:                      Okay.

Cris deRitis:                       If you look at the fe... I'm looking at it right now. The female labor force participation rate was 56.8 in September. Pre-pandemic, it was 57.90.

Mark Zandi:                      Okay.

Ryan Sweet:                      Overall for women though?

Dante DeAntonio:           Overall.

Ryan Sweet:                      I mean I actually look at Prime.

Mark Zandi:                      Yeah. Or [inaudible 00:44:31].

Dante DeAntonio:           But in prime age, women actually hit an all, or it was close an all-time high. I think that might have been last month.

Mark Zandi:                      The participation rate. Yeah.

Dante DeAntonio:           I think so. Yeah.

Mark Zandi:                      Or prime age.

Dante DeAntonio:           Yeah. I think there's certainly some evidence that it's not having a huge impact anymore, like it was in the early days of the recovery. I think it's still a factor to consider.

Mark Zandi:                      It's still a factor. Yeah. Okay. Is that [inaudible 00:44:50]-

Dante DeAntonio:           Oh, go ahead. Go ahead, Ryan.

Ryan Sweet:                      Prime age female labor force participation. September, 82.73. Pre-pandemic, 83.

Mark Zandi:                      Oh, so pretty close.

Ryan Sweet:                      We're really close.

Mark Zandi:                      Yeah, really close. Okay. And as I recall. One thing that surprised me about that work you did, was that participation rate by men. The male parents of young children was down a lot too at one point, as much as it was down for women, females. So I found that surprising.

Ryan Sweet:                      Yeah, it actually seemed, if I remembering it, there was a difference in timing. At the very onset of the pandemic, women, mothers got hit much harder. But then it seemed like over the first year of their recovery, they improved. But actually, male parents started to pull back a little bit. So it seemed like there was some switching behavior there. Just some difference in the initial impact, versus the slightly longer term impact of job losses. A little bit different for men and women.

Mark Zandi:                      Yeah. And I don't know if I said this earlier, but I'll say it again if I did. It feels like to me we can't count on any significant improvement in participation. That we're down at a point from pre-pandemic. If you go back pre-pandemic and look at the forecast we were making. And others were making for labor force participation. And now, two-and-a-half years later, we had participation down. I don't know if it was down a point, but it was down pretty close to a point, I think. So we expected it because of it, primarily because of the aging out of the baby boom generation out of the workforce. That was going to happen pandemic, no pandemic.

Ryan Sweet:                      If you look just at the forecast of the actual size of the labor force, though, we're still in a pretty big hole. I mean, it's recovered to the pre-pandemic high. But if you look at our forecast back at the end of 2019, for today. I think we were expecting two-and-a-half, 3 million more people to be in the labor force than there are currently.

Dante DeAntonio:           Yeah, you're right. Yeah. The rate, the participation was coming down. But we're still below what we would've expected in terms of overall labor force size.

Mark Zandi:                      No. No argument there. No, I'm just saying it's not because of participation. That goes to working age, population growth. And that probably goes back to immigration.

Dante DeAntonio:           True.

Mark Zandi:                      And actually, until today's numbers, I mean, I haven't had a chance to look. But over the past almost year, there's been a very significant increase in people that are foreign born that are in the workforce and working. That it feels like immigration is starting to pick up again. But it maybe fell back. It might have been somewhat statistical and fell back a little bit in this month. Given the data, I haven't had a chance to look. But it felt like we were starting to see some improvement. In fact, labor force grow, year-over-year. I don't know, maybe Ryan, you can look for this month. But last month, the month of August, it was close to 2%. And that's pretty good for labor force growth. Usually, it's half a point to a point in a more typical time. So that was strong, but maybe we could take a look. Okay. Cris, you want to go next?

Cris deRitis:                       Sure. 1.7.

Mark Zandi:                      Are you sure? 1.6?

Dante DeAntonio:           You hesitated.

Cris deRitis:                       I was debating to give you a softball or a softer ball.

Mark Zandi:                      Oh, so this is a softball, but not a softer ball.

Cris deRitis:                       Yes. Yes.

Mark Zandi:                      Okay. 1.7.

Cris deRitis:                       1.7.

Mark Zandi:                      [inaudible 00:48:20].

Cris deRitis:                       Nope. Oh, do you want units? If I tell you units it will give it away.

Mark Zandi:                      You don't have to. It's not 1.7 widgets though. It's something economically.

Cris deRitis:                       Yes.

Mark Zandi:                      Is it in the employment numbers?

Cris deRitis:                       Yes. This isn't market related.

Mark Zandi:                      Oh. But not today's jobs numbers?

Cris deRitis:                       No? No.

Ryan Sweet:                      So it's in JOLTS.

Cris deRitis:                       Yes.

Dante DeAntonio:           Or something you calculate. Oh, it's JOLTS. 1.7.

Cris deRitis:                       Yes. Yes. I think Dante's got it.

Mark Zandi:                      No, it's the-

Dante DeAntonio:           The unemployed per job opening?

Cris deRitis:                       Yes, yes. Softer ball.

Mark Zandi:                      So that is [inaudible 00:48:54]-

Cris deRitis:                       1.6 down. It's down from two.

Dante DeAntonio:           For unemployed worker. Right. Yeah.

Cris deRitis:                       Yeah.

Mark Zandi:                      All right. So-

Cris deRitis:                       That's right.

Mark Zandi:                      So explain what it is and why you picked it?

Cris deRitis:                       It's the number of job openings per unemployed worker.

Mark Zandi:                      Okay.

Cris deRitis:                       1.7 is still a high number. Prior to the pandemic, it was 1.2. So it got as high as two job openings per worker. And now it's come down to 1.7. So it's still elevated. There's been some academic work to suggest this is the most relevant number, in terms of assessing the tightness of the job market. And that this number has to come down, back at least to that 1.2 level. So we still have a long way to go. So we lost 1.1 million job openings, as we discussed earlier, in the month of August. But we need several months like that to get to something close to 7 million. Which would be consistent with this ratio.

Mark Zandi:                      Yeah. What was the peak for the ratio, do you know?

Cris deRitis:                       Was well over two, probably.

Mark Zandi:                      11 million.

Dante DeAntonio:           Right at two, I think.

Mark Zandi:                      Right at two.

Cris deRitis:                       Right at two. Yeah.

Mark Zandi:                      And you're saying 1.2 is historically consistent with the full employment?

Cris deRitis:                       Well, 1.2 is what we had prior to the pandemic.

Mark Zandi:                      Okay.

Cris deRitis:                       And as you recall, that was already, we already were thinking that was high. A hot market. So, probably something closer to one is ideal.

Mark Zandi:                      Ideal. [inaudible 00:50:29].

Cris deRitis:                       Right, right.

Mark Zandi:                      Well, I tell you guys, I have this sense, that number's going to come in fast right here. I just think it's coming in. Just based on, businesses are now nervous about recession. They're hearing, "Recession, recession, recession," and they're growing cautious. And that you're going to pull those job positions pretty quickly. So the fact that 1 million, and again, that might be overstated. Is indicative of all the other millions that are very soft opens. And they're going to evaporate here pretty quickly. Yeah.

Cris deRitis:                       So you want labor force growth?

Mark Zandi:                      Yeah. What's labor force growth?

Cris deRitis:                       What did you think it was?

Mark Zandi:                      What? Through the month of August, year-over-year, it was close to 2%.

Cris deRitis:                       Yeah. September was 1.99, so 2%.

Mark Zandi:                      Okay. I'm going back to labor supply. That's really strong.

Cris deRitis:                       Yeah. If you look before the pandemic, it was eyeballing the transit.

Mark Zandi:                      No, no. I mean, before the pandemic, trend labor force growth, was a half a point to no more than a point percentage.

Cris deRitis:                       Right.

Mark Zandi:                      Working age population was growing. No more than one. And participation had, that topped out. So high end of labor force growth was one and we're now at two. That's pretty good.

Cris deRitis:                       Yeah. When wage growth is this strong, it pulls people in.

Mark Zandi:                      Yeah. Well, yeah. But okay, so we got weakening labor demand. We still have reasonably good, I mean, I'd say strong labor supply. So that suggests things are moving in the right direction to ease this labor market, allow wage. And the next step here has got to be wage growth rolling over. That's got to happen.

Cris deRitis:                       Okay.

Mark Zandi:                      All right. I know the more I talk to you guys, the more optimistic I'm getting.

Cris deRitis:                       Oh, geez.

Dante DeAntonio:           That means something's going to be wrong.

Mark Zandi:                      Maybe it's just me talking myself into the optimism. I don't know. That's funny. All right. Okay. Well that was a good one. That was a good one. Okay. Ryan, you go next.

Ryan Sweet:                      All right, well this is a perfect segue. One number seems optimistic, but reality is a different number. So 2.2% and 0.4%.

Mark Zandi:                      2.2 and 0.4.

Ryan Sweet:                      So one's easy. One's a little bit harder.

Mark Zandi:                      Okay.

Cris deRitis:                       Are they labor market related?

Ryan Sweet:                      It is not labor market related.

Mark Zandi:                      Oh. Okay.

Ryan Sweet:                      But this is an important-

Mark Zandi:                      Is this an economic statistic that came out this past week?

Ryan Sweet:                      Yes. Well we, yeah.

Mark Zandi:                      Oh, what?

Ryan Sweet:                      I don't want to give you hint, but-

Cris deRitis:                       He's not sure.

Ryan Sweet:                      No, it came out this week. But it's-

Mark Zandi:                      Not a-

Ryan Sweet:                      Yes.

Cris deRitis:                       It's not a release.

Ryan Sweet:                      Statistically, yes.

Cris deRitis:                       It's not an economic-

Ryan Sweet:                      It's not a release.

Mark Zandi:                      Okay. Okay.

Ryan Sweet:                      So you should able to get this.

Mark Zandi:                      Really? And 2.2 is a positive. The 0.4 is a negative?

Ryan Sweet:                      They're both positive numbers, but one looks-

Mark Zandi:                      Oh, yeah.

Ryan Sweet:                      So 2.2 looks good. But in reality, 0.4 is where we are. I'm giving you real big [inaudible 00:53:57].

Mark Zandi:                      [inaudible 00:53:58].

Dante DeAntonio:           Oh, wow.

Mark Zandi:                      Yeah. This seems this really-

Dante DeAntonio:           It's not a release.

Mark Zandi:                      This is like, "Alice in Wonderland."

Dante DeAntonio:           Yeah.

Cris deRitis:                       One's not good. And it's [inaudible 00:54:05].

Mark Zandi:                      Right. That's what he's saying.

Ryan Sweet:                      Riddle me this.

Mark Zandi:                      Is it inflation related?

Ryan Sweet:                      It is not.

Mark Zandi:                      Okay.

Ryan Sweet:                      It's the number you asked about.

Mark Zandi:                      It's the number I asked. I asked about so many numbers. That's the problem.

Ryan Sweet:                      I know.

Mark Zandi:                      Yeah. It's like I'm constantly asking about numbers. Okay.

Ryan Sweet:                      It came out in the last seven days, or you derived it within the last seven days, I guess.

Mark Zandi:                      Is it derivation? Your derivation?

Ryan Sweet:                      It's not-

Mark Zandi:                      You derived it. You calculated it.

Ryan Sweet:                      Yes.

Mark Zandi:                      You calculated it. Okay.

Ryan Sweet:                      Okay.

Mark Zandi:                      I know as soon as you say it, I'm going to say, "Oh yeah, that's right."

Cris deRitis:                       Is it a market, financial market variable?

Ryan Sweet:                      It is not financial market variable.

Cris deRitis:                       Okay.

Mark Zandi:                      Okay. Commodity related?

Cris deRitis:                       It is not. It was closer to one, this time last week.

Mark Zandi:                      Oh, geez Louise.

Cris deRitis:                       Come on Dante. You should know this. [inaudible 00:55:14]-

Dante DeAntonio:           It's a repay number. It's UI claims type of-

Ryan Sweet:                      The daily number. It's a daily number.

Mark Zandi:                      Oh, wait. Wait.

Ryan Sweet:                      Oh, come on, Mark.

Mark Zandi:                      Wait, really? Okay. Is that something inflation expect? No, you said it's not inflation related. It's not. Oh, is it bond? It's not inflation expectations related, anyway.

Ryan Sweet:                      If you open up economic, it's plastered right there in a big blue circle.

Mark Zandi:                      Oh, I know what it is. I know what it is.

Dante DeAntonio:           High frequency GDP.

Mark Zandi:                      Yeah, GDP.

Ryan Sweet:                      GDP. It's our tracking estimate for third quarter GDP. Went from 1% to 2.2%. But the reason for the increase, and why it's misleading of the strength, is that it's all trade. So the trade deficit really narrowed in August. And if you exclude trade exports, GDPs really tracking 0.4%. So just like how we discounted the drop in GDP in the first half of the year, because it's a big swings in inventories in trade. We kind of have to discount the strength in Q3 because it's all trade related.

Mark Zandi:                      Ah, interesting.

Dante DeAntonio:           Yeah, I read that PC road. All those numbers sound so familiar now and that's why.

Ryan Sweet:                      There you go.

Mark Zandi:                      It's interesting. So it's basically the GDP has really gone nowhere, since-

Ryan Sweet:                      Exactly. All year.

Mark Zandi:                      All year long. It's just basically flat. That's an amazing thing. But the reality is GDP in Q3, and now we're in October, we're going to get more data. But it feels like it's going to come in positive.

Ryan Sweet:                      It's going to come in positive.

Mark Zandi:                      Right. It's going to come in around 2%-ish, something like that.

Ryan Sweet:                      We got more [inaudible 00:56:47] to go. But some of the weak weaknesses start to broaden out.

Dante DeAntonio:           Weak productivity story. I mean it's-

Ryan Sweet:                      Yeah.

Dante DeAntonio:           [inaudible 00:56:56]. It sounds like something like that.

Mark Zandi:                      Ouch.

Dante DeAntonio:           Ouch. Yeah.

Mark Zandi:                      Just a comment there. Or Barb, that was a Barb.

Dante DeAntonio:           That was definitely a Barb.

Mark Zandi:                      Because Dante's a productivity skeptic and Cris is a productivity-

Cris deRitis:                       Optimist.

Mark Zandi:                      ... optimist. [inaudible 00:57:18].

Cris deRitis:                       Right now it's not looking so good. He's not looking so good.

Ryan Sweet:                      No.

Mark Zandi:                      Okay. All right. I got one for you.

Cris deRitis:                       All right, Mark. Let's hear yours.

Mark Zandi:                      I got one. I got one for you. I'm not sure I'm going to give it, I'm going to give you a number to make it a little harder. If I give you the exact, I'm giving you a little bit of a hint by telling you all this. If I give you the exact right number, which I may have to do if you found her here.

Ryan Sweet:                      So wait, wait. You're giving us a wrong number?

Mark Zandi:                      No, no. I'm going to round. I'm going to round.

Cris deRitis:                       Okay.

Ryan Sweet:                      Oh, okay.

Mark Zandi:                      I'm going to round. It's a rounded number. It's a rounded number. And the rounded number is 30,000.

Cris deRitis:                       Employment related?

Mark Zandi:                      Employment related.

Cris deRitis:                       It's a sector of employment.

Mark Zandi:                      No, it's not in the Jobs' Report.

Cris deRitis:                       Not in the Jobs' Report.

Mark Zandi:                      Not in today's Employment Report.

Cris deRitis:                       Is it in JOLTS?

Mark Zandi:                      It's not in JOLTS. The Job Opening Labor Turnover claims.

Dante DeAntonio:           Oh is this challenger layoffs?

Mark Zandi:                      Yes it is. Ding, ding, ding, ding, ding. It gets a bell. It definitely gets a bell. Yeah. Very good. Gets a cow bell.

Dante DeAntonio:           Isn't it 26,000?

Mark Zandi:                      No, it was 29,000.

Dante DeAntonio:           You rounded.

Mark Zandi:                      29,989.

Dante DeAntonio:           All right.

Mark Zandi:                      You can see why I didn't want to say that. Because if I said that, you would've gotten it right away, probably.

Dante DeAntonio:           Probably.

Mark Zandi:                      Yeah. So I don't really... Do you pay much attention to the layoff announcements, the challenger layoff announcements? Do you look at them?

Dante DeAntonio:           Yeah, I look at them. It doesn't factor into the employment models because these are announced layoffs, not necessarily layoffs that have occurred. And they, businesses can change their plans. So they can announce 29,000 layoffs, but only go through with half a full.

Mark Zandi:                      Yeah, I'm with you. I'm beginning to think though, we need to pay more attention to that in the current context. Because the next thing that's got to happen is layoffs. More layoffs. And again, that sounds really weird to say. It's bizarre to say that, "Good bad news is bad news." That's what we're saying here. But layoffs are just incredibly low. You saw that in the initial claims for unemployment insurance. They're hanging around 200k. I think our rule of thumb is, "250k per week, is consistent with a healthy good economy." They're not too tight, not too cold. And 200k. Is that right? 250k? Should we put that stake in the ground? Is that the number we should be using, 250k, on UI claims. Ryan?

Ryan Sweet:                      So when I estimate, the break even so that-

Mark Zandi:                      Yeah.

Ryan Sweet:                      I mean I think you're right. 250 is a healthy, we're creating jobs.

Mark Zandi:                      Healthy. Yeah.

Ryan Sweet:                      So that kind of line in the sand where claims are consistent with no monthly job growth, is closer to 280.

Mark Zandi:                      Okay. Okay. Yeah. But we [inaudible 01:00:03].

Ryan Sweet:                      I would agree, 250 is good.

Mark Zandi:                      250 is kind of just right.

Ryan Sweet:                      Hit the spot.

Mark Zandi:                      But 200 is like, "That's no layoff."

Ryan Sweet:                      Too low.

Mark Zandi:                      Would be very tight.

Ryan Sweet:                      Too low.

Mark Zandi:                      And the layoff announcements, even though you're right, they may not translate. And depends on timing and everything else, into... That might be worthwhile as a leading indicator in the current environment, where businesses are growing more cautious. Where they're pulling unfilled positions. The other thing that you would expect them would happen, you'd see more announced layoffs. And we actually, that 30,000 or 29,989 to be precise. In the month of September, it was pretty high by recent historical standards. It's been incredibly low. I think you add up all of the layoff announcements so far this year, through the month of October.

                                             It's a record low, 10 months into a year. But that number, that 30,000. That's pretty high. And so if we start seeing... I would expect to see more of that as businesses are growing more cautious here and worried about recession. And that would be an indicator that we are starting to see a more normal, at least a more normalized level of layoffs. And that would again, be another way to get job growth down into that sub 100k that we need. To get unemployment moving north and taking the pressure off of wages, and ultimately, prices. So I think we might want to start focusing on... Is there another source of layoff announcements? I think there is.

Ryan Sweet:                      You get the, what are they called? Warn Reports.

Mark Zandi:                      Yeah, we might want to take a look at that too.

Ryan Sweet:                      We can monitor those. Yeah.

Mark Zandi:                      Start monitoring those to take a look at that.

Cris deRitis:                       Are they available? Dante, are they by state?

Dante DeAntonio:           Yeah. Right. You're required to report to the state. Some state office, if you're planning to lay off above a certain, I think it's above 50 employ... There's some thresholds. If you're going to lay off five people, you don't have to file a warn notice. But if it's above a certain threshold, you have to file with the state.

Mark Zandi:                      And-

Dante DeAntonio:           Those layoffs are concentrated in tech and retail.

Ryan Sweet:                      Yeah. Yeah.

Mark Zandi:                      Healthcare, I think too. A little bit in healthcare.

Dante DeAntonio:           But you're right, mostly tech.

Mark Zandi:                      Which is consistent with the layoff announcements. The tech companies have been up front. But-

Dante DeAntonio:           Yeah. I talked to a lot of the Bay Area lenders and they have a very different perspective than the national view. When we talk about layoffs in the job market. And they're seeing, because tech industry is right there. So-

Mark Zandi:                      Yeah. Yeah, you're right. And they see that's where housing declines have been most affected. In the [inaudible 01:02:38]?

Dante DeAntonio:           Exactly. So that's what they're saying is that, "Ah, there's definitely a regional concentration-"

Mark Zandi:                      Right.

Dante DeAntonio:           ... "Of these layoffs.

Mark Zandi:                      Okay. Why don't we... Whenever I say it's going to be a short podcast, it never is. Because I have so much, we have so much fun talking about the numbers. But it is getting a little late in the day here in Singapore. I'm coming up on midnight. And by the way, I have not eaten dinner, so I'm like... And I got all these snacks. I got pistachios right here. I got fruit and nut bar from London. I got some dark chocolate I took off the plane from London.

Dante DeAntonio:           Did you declare that at the border there?

Mark Zandi:                      Did I need to ?

Dante DeAntonio:           No, it's second item I think.

Cris deRitis:                       Yeah.

Mark Zandi:                      Well, this is like a pound or something. Well, now. This used to be, took three bucks. Now it cost me a buck because the dollar is so strong. So actually I bought two of them. Here's the second one right here. But we probably should wind down this conversation.

Cris deRitis:                       Are you going to be able to find somewhere to eat at midnight?

Mark Zandi:                      Well, in fact, yes. Singapore had 20 hours so then never sleeps. I could get something. Wow, that's good. Yeah, we'll see how that goes. I got a 24 gym, so I'm contemplating, should I go run before I have my dinner? What do you think? Would you be less of me or more of me if I went for a run before dinner at midnight in Singapore?

Dante DeAntonio:           What do you have scheduled for tomorrow?

Mark Zandi:                      Oh, actually, interestingly enough. Steve Cochran, our good colleague is here in Singapore. He manages our Asian... He who, and I known him for 30 years. He calls himself, "007." he was the seventh employee of the Regional Financial Associates that is the precursor to our company now. And we're going, he and his wife and I are going to go to the botanical gardens here in Singapore. So [inaudible 01:04:41].

Dante DeAntonio:           Oh. Those are famous.

Cris deRitis:                       Then you have to go for a run. You got anything on your plate?

Mark Zandi:                      What's that?

Cris deRitis:                       Yeah. Then you got a whole free day tomorrow. You got to go for a run.

Mark Zandi:                      Okay, I'm going to go for a run.

Dante DeAntonio:           Well, it depends what time they're going to go to the gardens.

Mark Zandi:                      9:00 AM. He starts early.

Cris deRitis:                       Oh no, go. Go to bed. 9:00 AM? You're insane. No.

Mark Zandi:                      That's funny. We'll see how wired I am. But we're not done yet. So we got more to go here. I want to know two things. First is, where do you think the terminal rate for the funds rate will be? Terminal rate being, What is the highest, the federal fund rate going to get? Bonus, if you can tell me when that's going to be and you know how long it's going to stay there. And then I do want to hear again, your probability of recession over the next 12 to 18 months. So we should reprise that. And should I start with the most pessimist person on the podcast? Okay, let's get it over with. Ryan. What's-

Ryan Sweet:                      How am I the most pessimistic person? No, it's Cris. Cris is the most pessimistic.

Mark Zandi:                      I thought you were.

Ryan Sweet:                      No. Cris's recession odds are higher than mine.

Cris deRitis:                       No, come on.

Mark Zandi:                      No, I don't. Is that right?

Cris deRitis:                       Are you sure? They might be. I think they are.

Mark Zandi:                      Let's go with Cris. Cris. Okay. So first, give me your fed forecast and then give me your odds of recession.

Cris deRitis:                       All right. Fed forecast, 4.25 to 4.5%.

Mark Zandi:                      Oh wait, that's less than what markets are anticipating.

Cris deRitis:                       Correct. I don't think they'll-

Mark Zandi:                      Oh, you think the economy's going-

Cris deRitis:                       ... make it all the way before we get there.

Mark Zandi:                      Yep.

Ryan Sweet:                      Oh my God. He is really... Whoa. Laurie, you are pessimistic.

Mark Zandi:                      Okay.

Cris deRitis:                       Realistic. Realistic, I like to say.

Mark Zandi:                      So you think a recession is going to start imminently?

Cris deRitis:                       First quarter.

Mark Zandi:                      First quarter.

Dante DeAntonio:           That's pretty [inaudible 01:06:34].

Mark Zandi:                      That's pretty [inaudible 01:06:36].

Dante DeAntonio:           That's two months you got.

Cris deRitis:                       Wow. Sometimes. It could be at the end of the first quarter. I'll give you some hope. Right.

Mark Zandi:                      End of the first quarter.

Dante DeAntonio:           Maybe we have five months instead of two or three. There you go.

Mark Zandi:                      Oh.

Dante DeAntonio:           Wait, when do you get back to the U.S.?

Mark Zandi:                      Me? I get back a week from now. A week from Saturday I come back. Why?

Dante DeAntonio:           So you're saying the recession's going to start right around then?

Mark Zandi:                      Yeah. Right.

Dante DeAntonio:           Trouble seems to follow you everywhere.

Mark Zandi:                      Exactly. I'm trouble. I'm trouble everywhere I go. Oh, geez. I should write that up, shouldn't I?

Dante DeAntonio:           That would be good.

Mark Zandi:                      All right. Oh, what's the probability of recession then, over the next-

Cris deRitis:                       70%. In the next year?

Mark Zandi:                      Well, you're saying in the next six months.

Cris deRitis:                       Yeah. Well, yeah. It will give me some-

Mark Zandi:                      I'm giving you some slack. Yeah. 70%. Over the next 12 to 18 months. Let's say through the end of 2023, just around it. So 70%.

Cris deRitis:                       Okay, I'll keep it there. Yeah. 70%.

Mark Zandi:                      So Cris, let me ask you this. You would... Oh, did I lose you?

Cris deRitis:                       No, I'm still here.

Mark Zandi:                      Sorry, I hit the wrong button. You would change our forecast to a baseline forecast to have a recession on it now?

Cris deRitis:                       I would.

Mark Zandi:                      You would.

Cris deRitis:                       I mean, you're already getting pretty close there. I think we have first quarter going negative. It's not a lot.

Mark Zandi:                      Not on jobs though, do we?

Cris deRitis:                       No. You have unemployment creeping up.

Mark Zandi:                      Yeah.

Cris deRitis:                       Right.

Mark Zandi:                      Well, on a year-over-year basis, GDP goes basically... It might go a little negative actually in Q4 and Q1, given the weak GDP in the first half.

Cris deRitis:                       Annualized.

Mark Zandi:                      Yeah.

Cris deRitis:                       But at least that's the last I saw. I don't know.

Mark Zandi:                      I don't think we have jobs going negative though, in the forecast [inaudible 01:08:22]. Sure we don't.

Cris deRitis:                       Yeah.

Mark Zandi:                      Okay. Interesting. All right, I'll go. Dante, do you have a view on The Fed?

Dante DeAntonio:           Yeah, I think I'm in line with the market. I think 4.5 to 4.75. I think that that makes sense to me.

Mark Zandi:                      And that's the terminal rate, the highest is going to get. And you think it stays there all next year?

Dante DeAntonio:           No, my recession odds are pretty high. So I'm not sure it stays there all next year.

Mark Zandi:                      Oh, okay. What's your recession odds?

Dante DeAntonio:           I'd probably go 65%. I'll hedge a little lower than Cris, but [inaudible 01:08:52]-

Mark Zandi:                      So you wouldn't change?

Dante DeAntonio:           Up from our [inaudible 01:08:56].

Mark Zandi:                      You wouldn't change the [inaudible 01:08:56] forecast?

Dante DeAntonio:           Not today. I'd probably wait another month or two and see where we are. I think a little bit more information would be useful here.

Mark Zandi:                      Okay. All right. I hear you. Okay. And Ryan?

Ryan Sweet:                      There's no collusion, but I'm exactly with Cris. 70% probability recession, 4.25 to 4.5. They can't get any higher.

Mark Zandi:                      Well, okay, so wait. They're going to raise the funds rate. Well you tell me what they're going to do with the funds rate here in November?

Ryan Sweet:                      75.

Mark Zandi:                      What are they going to do in December?

Ryan Sweet:                      50.

Mark Zandi:                      What are they going to do after that? Nothing, is what you're saying. That's it.

Ryan Sweet:                      That's it.

Mark Zandi:                      So that means we're going into recession early next year.

Ryan Sweet:                      Correct.

Mark Zandi:                      That's what you're saying. Okay.

Ryan Sweet:                      Yeah, I think they're going to see the economy's really slowing down in the second. And late this year, early next pause at 4.25, 4.5. Leave it there for an extended period of time, until it's very clear that the economy's in a recession. And then start coming.

Mark Zandi:                      But it sounds like they only, but you... Their only reason they would stop is if it really looks like either two things. A good thing, inflation's coming in. Or second, what you're suggesting, is the economy's falling apart. So you're saying the economy's going to be falling apart early next year, is what you're saying?

Ryan Sweet:                      Yes.

Mark Zandi:                      That's what-

Ryan Sweet:                      So I would put a recession. I would put a mild recession in the baseline.

Mark Zandi:                      Okay. Beginning in Q1?

Ryan Sweet:                      Wow, I mean-

Mark Zandi:                      That's what it sounds like you're saying.

Ryan Sweet:                      Yeah, I'd say the first half of the year.

Mark Zandi:                      Okay. Well, how's that consistent with them not? And they're not going to tighten it after December, they're going to stop.

Ryan Sweet:                      I don't think so.

Mark Zandi:                      Okay. All right.

Ryan Sweet:                      If I'm wrong and they keep tightening, then the odds of recession go up even higher.

Mark Zandi:                      So what's your probability of recession?

Ryan Sweet:                      70.

Mark Zandi:                      70. And you were there last time we chatted about this, weren't you? 70?

Ryan Sweet:                      I think I was 65.

Mark Zandi:                      Oh, it was 65. And Cris, you were 70?

Cris deRitis:                       70.

Mark Zandi:                      You were at 70, you went back to 65. And-

Cris deRitis:                       Yeah. Now back up to 70.

Mark Zandi:                      Oh man.

Ryan Sweet:                      Did you see Cris's chart with the leading indicators?

Mark Zandi:                      No. Oh, you mean his? No, no, I'm not sure.

Ryan Sweet:                      The six month decline. Like Cris could elaborate.

Cris deRitis:                       Decline in leading economic indicators.

Mark Zandi:                      Oh, that one. You want to explain that, Cris?

Dante DeAntonio:           That's it. That's the [inaudible 01:11:20]-

Cris deRitis:                       So what is the percentage change in over six months of the leading economic indicators, produced by the conference board. We've never not had a recession when that changes, as large as it is now.

Ryan Sweet:                      Right.

Cris deRitis:                       Right. So those leading economic indicators are signaling a high probability of recession going forward.

Mark Zandi:                      Yeah. And that's the, I guess the yield curves in there. The stock market is in there.

Cris deRitis:                       Yeah. The yield curves in. Housing permits.

Mark Zandi:                      Oh yeah, housing permits are in there.

Cris deRitis:                       Yeah, it's an amalgam of a number of different-

Mark Zandi:                      Oh man.

Cris deRitis:                       And there's weakness all around.

Mark Zandi:                      Yeah. Well there's, by definition, there's got to be weakness.

Cris deRitis:                       We kind got to [inaudible 01:12:09].

Dante DeAntonio:           You're saying it's Well, it's by design?

Mark Zandi:                      It's by design. It has to happen. Otherwise, you can't get wage growth down, inflation back in.

Dante DeAntonio:           That's right.

Mark Zandi:                      Wow. That is so interesting.

Dante DeAntonio:           And what we're debating, is doesn't go too far.

Mark Zandi:                      Yeah.

Cris deRitis:                       Your argument's a controlled weakness. We're not in free-fall yet. That's your-

Mark Zandi:                      Yeah, it's like a free fall for me. Yeah.

Dante DeAntonio:           What's yours, Mark?

Mark Zandi:                      Well, I say 4.5 to 4.75 terminal rate. So 0.75 In November, 0.5 in December. 0.25 in February. Those are the meetings. And then you're 4.5 to 4.75. And they just hang out.

Dante DeAntonio:           Isn't there a meeting in January?

Cris deRitis:                       Yeah.

Dante DeAntonio:           I thought it was February.

Cris deRitis:                       It was to meet in January.

Mark Zandi:                      Oh, it's late January. I think it's late January or something.

Cris deRitis:                       Late January. All right.

Dante DeAntonio:           Yeah, late January.

Cris deRitis:                       I think you're right.

Mark Zandi:                      And then they hang out there, and take a look around. See what's going on with wages, what's going on with inflation. What's going on with jobs, things that they're focused on. And if everything is coming in, that's the end of the story. And that's what I would consider to be the baseline. No recession. It comes close, it's going to feel uncomfortable. Unemployment's going to move higher. But we don't actually go in with, we don't get the kind of job loss you would need, I think. To characterize the environment as a recessionary environment. You might see a month or two or three with job loss, but it's not going to be persistent. Three, four, 5 million job loss. I just don't think you're going to see that.

Dante DeAntonio:           So did you think we're going to get an inverted policy curve? So the 10-year minus The Fed funds?

Mark Zandi:                      Well, I think there's a reasonable chance we don't. Because if we do, that's just one more indicator. Then every single indicator I know would be signaling recession. Except for the kind of, that's where all the long leading indicators would suggest recession. Consumer confidence has, doesn't suggest recession within six. That's three, six months. And that doesn't suggest recession in three, six months. And the certainly unemployment rate doesn't suggest recessions. That the other... Of course, you did a great job. What was it? If the unemployment rate rises by more than a half a point within a three month period, then we're in. And it's in-

Dante DeAntonio:           Over a year. Half a point over a year.

Mark Zandi:                      Oh, is it half a point over a 12-month period?

Dante DeAntonio:           Over 12 months.

Mark Zandi:                      Over 12 months. Okay. Over 12 a 12-month period.

Dante DeAntonio:           That's really confirmation that we are in. That's-

Cris deRitis:                       You're already in.

Dante DeAntonio:           That's not a meeting [inaudible 01:14:42].

Mark Zandi:                      But it pegs the timing of recessions though, very accurately?

Dante DeAntonio:           That's right.

Mark Zandi:                      [inaudible 01:14:47].

Dante DeAntonio:           The start.

Mark Zandi:                      It pegs the start of the recession, the month, very, very accurately.

Dante DeAntonio:           Right.

Mark Zandi:                      So that's not signaling anything.

Dante DeAntonio:           But that's going to be late to the game. By the time we get that-

Mark Zandi:                      Yeah. So we're talking about kind of long lead. There's intermediate lead. I'd say confidence is intermediate lead. And I'd say the unemployment rate is no lead. It's just-

Dante DeAntonio:           Coincidence.

Mark Zandi:                      ... we're in a recession.

Dante DeAntonio:           Yeah.

Mark Zandi:                      But you can see the unemployment rate. You can. Unemployment has to start rising to get it up at half a point in a year. So we can see it headed in that direction. And right now, it's not headed in that direction.

Dante DeAntonio:           That's right.

Cris deRitis:                       You mean it's going in the opposite direction?

Dante DeAntonio:           It went down 3.5%.

Mark Zandi:                      Yeah, I'd say I'd still say 50/50 over the next 12. I would say through the end of next year, 50/50. So the narrative is The Fed pauses after the early, the hike and early next year. They hang out, they see what's going on. And they'll get confirmation at that point by summer of next year, that wage growth is... That the job market is moderating, easing up. Wage growth is rolling over, inflation is going to keep coming in.

                                             So all the things that they... Inflation expectations are well-anchored. They remain well-anchored, like they are right now. And it's going to be painful. It's going to be close, but we don't get the kind of job... Again, the job loss that I think you would need to characterize the environment as a recession. It may come down to just a judgment call, as to what is this debate we've been having? What is a recession? Because you may be in a recession without job loss. That would be unprecedented, but perhaps that could happen. Perhaps the national... The business cycle data, the [inaudible 01:16:47] National Bureau of Economic Research could decide it's a recession. Even if you don't have a lot of job loss. I'm not sure.

Dante DeAntonio:           Modest job loss. What if we lose two or 300,000 jobs?

Mark Zandi:                      Yeah. Would you consider that a recession? I mean-

Dante DeAntonio:           Normally. But if everything else is falling apart.

Mark Zandi:                      Because you could have a month down on 300k and it's just a statistical fluke. I mean-

Dante DeAntonio:           Yeah. So that's the question.

Mark Zandi:                      Is that a recession? Recession to me, means broad based persistent decline. It's got to have job loss, you would think. But I don't know, maybe there be different perspective on that in the current environment.

Dante DeAntonio:           So I still owe you that path for The Fed funds rate? You want me to do based on 4.5 to 4.75, being the peak?

Mark Zandi:                      Yeah.

Dante DeAntonio:           Okay. I'll send it to you over the weekend.

Mark Zandi:                      That's what markets are expecting right now. Certainly as of today.

Dante DeAntonio:           Oh yeah.

Mark Zandi:                      Yeah.

Dante DeAntonio:           Yes. [inaudible 01:17:40] line. I think that's most likely baseline.

Mark Zandi:                      Okay. Oh boy.

Ryan Sweet:                      All right. Go free your run.

Mark Zandi:                      I know, I'm bummed. You guys are bumming me out. All right. Okay. Well, can I ask one more question and then we'll end? When you look at all the different projections being done out there. Roughly speaking, consensus is the... Now, what's the consensus? Well, do you think it's substantially people think we're going into recession or not? Or is it 50/50? Curious what people are saying.

Dante DeAntonio:           Well, I don't have a scientific survey here, but certainly if we look at... Just anecdotally, look at some of the Wall Street firms.

Mark Zandi:                      Yeah.

Dante DeAntonio:           Other firms does look increasingly, if not a recession, certainly a significant slowing.

Mark Zandi:                      Oh, yeah.

Dante DeAntonio:           So the consensus for... Go ahead, Cris. I'm sorry.

Cris deRitis:                       I was going to... But I do think that majority now is pointing toward a recession. But what do you see, Ryan?

Ryan Sweet:                      So the consensus for GDP growth in 2023 is 0.7%.

Cris deRitis:                       Oh, that's our forecast. It's exactly our forecast.

Ryan Sweet:                      And there's, eyeballing it, maybe 15 to 20 that have individual forecasters. That haven't declined in GDP, out of 75.

Mark Zandi:                      Okay. So we're, okay.

Ryan Sweet:                      That's fine.

Mark Zandi:                      All right. So it feels like we're in the middle of the consensus, that's what it feels like.

Ryan Sweet:                      Correct.

Mark Zandi:                      Yeah. Okay. Meaning me, you guys.

Ryan Sweet:                      You maverick.

Mark Zandi:                      Oh, it feels so lonely. Oh, geez. This is killing me. All right. Well, I think we're at the moment of truth though. The next few months, we're going to figure out which way this thing goes. Okay. With that, we're going to call it a podcast and talk to you next week. Take care now, everyone.