>>> CHAIRMAN POWELL, MANY OF
THE SIGNIFICANT BANKING
PERSONNEL AND ECONOMISTS SAY WE
ARE NOT IN A RECESSION.
LET ME GIVE YOU WHAT THE FACTS
ARE IN TERMS OF THE STATE OF
THE ECONOMY.
NUMBER ONE.
WE HAVE A RECORD JOB MARKET,
RECORD UNEMPLOYMENT OF 3.6%
TODAY.
WE HAVE CREATED 9 MILLION NEW
JOBS SO FAR. BUSINESSES ARE
INVESTING IN AMERICA AT RECORD
RATES.
THAT DOESN'T SOUND LIKE A
RECESSION TO ME.
>>> PRESIDENT BIDEN REACTING TO
YESTERDAY'S ECONOMIC NEWS THAT
THE ECONOMY SHRANK FOR THE
SECOND QUARTER IN A ROW.
LET'S BRING IN FORMER TREASURY
OFFICIAL AND MORNING JOE
ECONOMIC ANALYST STEVE RATTNER.
STEVE, BEFORE WE DIVE INTO YOUR
CHARTS, JUST YOUR ASSESSMENT OF
SOMEBODY WHO HAS LIVED AND WORKED IN THIS STUFF FOR HIS
WORKED IN THIS STUFF FOR HIS
ENTIRE LIFE, ABOUT WHAT TWO
CONSECUTIVE QUARTERS OF
ECONOMIC CONTRACTION MEAN.
PEOPLE ARE USING THIS IS THE
DEFINITION OF RECESSION,
OBVIOUSLY POLITICIANS WANT TO
USE IT AS A BLUNT INSTRUMENT.
BUT IS THIS ECONOMY IN A
RECESSION OR NOT?
>> ALMOST CERTAINLY NOT,
WILLIE, AND WE WILL GET INTO
THIS WITH SOME DATA IN THE
CHARTS.
BUT THIS TWO QUARTERS OF
NEGATIVE GDP THING IS A COMMON
LAYMAN'S DEFINITION.
WHAT HAPPENS IN THE REAL WORLD
IS THAT A NONPARTISAN
INSTITUTION CALLED THE ECONOMIC
BUREAU OF RESEARCH COMES IN AND
DECIDES WHEN A RECESSION BEGINS
AND ENDS, AND IT WON'T DO SO FOR A WHILE BECAUSE HE
FOR A WHILE BECAUSE HE
CONSIDERS ALL THE DATA.
AS THE PRESIDENT POINTED OUT,
WHAT IS GOING ON IN THE JOBS
MARKET, WHAT IS GOING ON WITH
CONSUMERS, WHAT IS GOING ON
WITH INVESTMENT.
AFTER ALL THAT IS SAID AND
DONE, USUALLY MONTHS, MAYBE
EVEN A YEAR LATER, THEY COME IN
AND TELL US WHETHER WE WERE IN
A RECESSION OR NOT.
SO IT IS A VERY TECHNICAL
ISSUE.
THIS TWO QUARTERS THING IS JUST
SHORTHAND.
>> LET'S TAKE A LOOK AT THE
CHARTS.
YOU TALK ABOUT THE U.S. ECONOMY
CONTRACTING AGAIN, BUT YOU TAKE
A LITTLE CLOSER LOOK AT WHAT
THAT MEANS.
>> SURE.
SO FIRST, LET'S JUST GRAB A
LITTLE BIT OF HISTORY.
THE SOLID RED LINE IS HOW THE
GDP OVERALL HAS BEEN PERFORMING
FOR THE LAST 18 MONTHS.
AS YOU CAN SEE, FOR THE LAST
YEAR, SINCE 2021 WE HAVE HAD
VERY SIGNIFICANT GROWTH.
WE HAVE ACTUALLY HAD 5.7%
GROWTH.
AS THE PRESIDENT HAS POINTED
OUT ON MANY OCCASIONS, THAT IS
AN EXCEPTIONALLY HIGH RATE OF
GROWTH.
IT OBVIOUSLY HAD TO DO WITH
COMING OUT OF THE PANDEMIC
EVENT.
THEN YOU CAN SEE THE RED LINE
DIP BELOW ZERO, AND THOSE ARE
OUR TWO QUARTERS OF NEGATIVE
GROWTH.
ALL THOSE COLORED BARS ARE
BASICALLY THE DIFFERENT PIECES
OF GDP.
THINGS ABOVE THE HORIZONTAL
BLACK LINE ARE THINGS THAT ADD
TO GDP.
THINGS BELOW IT ARE THINGS THAT
ATTRACT IT.
YOU CAN SEE THAT THE OVERALL
DECLINE WAS SMALL, SO THERE IS
A MUST AS MUCH STUFF ABOVE THE
BAR AND LINE IS BELOW IT.
WHAT'S GOING ON HERE ARE SOME
TECHNICAL FACTORS THAT I'M
GOING TO SPARE YOU, BUT INVENTORY AND FOREIGN TRADE AND
INVENTORY AND FOREIGN TRADE AND
SO ON, THINGS TO NOTE ARE THE
TURQUOISE LINE, WHICH IS HOW
MUCH SERVICES CONSUMERS ARE
BUYING.
THIS IS THE FAMOUS AIRLINE
SITUATION, HOTELS, DOCTORS,
LAWYERS, ALL THAT STUFF HAS
STAYED SUBSTANTIALLY POSITIVE
THROUGH THIS PERIOD.
THEY ARE BUYING FEWER GOODS AT
THE MOMENT.
THAT IS THE DARK BLUE SQUARE
JUST BELOW THE LINE.
BUT THAT IS FAIRLY NORMAL AFTER
WHAT HAS GONE ON IN THE
PANDEMIC.
I THINK THE OTHER IMPORTANT
THINGS TO NOTE ARE THAT HOUSING
HAS BEGUN TO DECLINE.
YOU HAD A 14% DECLINE IN
HOUSING LAST QUARTER.
THAT IS TO BE EXPECTED WHEN YOU
RAISE INTEREST RATES AND
MORTGAGE RATES AS YOU KNOW HAVE
DOUBLED OVER THE PAST SEVERAL
MONTHS, IT HASN'T AFFECTED
HOUSING.
THE LAST THING I WOULD NOTE ON
THIS CHART IS THE RED LINE TO
THE RIGHT.
THAT IS THE CONSENSUS
PROJECTION OF ECONOMISTS FOR
WHAT COULD HAPPEN IN THE NEXT
TWO QUARTERS, WHICH IS SLIGHTLY
POSITIVE GDP, I.E.
NOT A CONTRACTION.
I STILL THINK THERE IS A VERY
SUBSTANTIAL CHANCE, PROBABLY
MORE THAN 50%, THAT WE HAVE
SOME KIND OF RECESSION AT SOME
POINT TO GET INFLATION UNDER
CONTROL, BUT IT IS NOT WHERE WE
ARE TODAY.
>> SO AS WE MOVE TO YOUR SECOND
CHART, STEVE, ONE OF THE POINTS
THAT PEOPLE LIKE JEROME POWELL
AND JANET YELLEN HAVE BEEN
MAKING, IS IF YOU LOOK AT THE
UNEMPLOYMENT PICTURE, IT IS NOT
AN ECONOMY IN RECESSION.
WE HAVE TWICE AS MANY JOBS AS
PEOPLE LOOKING FOR THEM.
IT JUST DOESN'T SQUARE WITH THE
ARGUMENT THAT THIS IS A
RECESSION.
DO YOU AGREE WITH THEM ON THAT?
>> THIS CHART SHOWS EXACTLY
WHAT YOU JUST SAID.
THIS GOES BACK THROUGH EVERY
RECESSION FROM THE MID-1950S
ON, WITH THE EXCEPTION OF THE
PANDEMIC, BECAUSE UNEMPLOYMENT
WAS LITERALLY OFF THIS CHART.
YOU CAN SEE THAT IN EVERY
RECESSION SINCE 1957, YOU HAVE
HAD A MATERIAL INCREASE IN ON
EMPLOYMENT.
ALL THOSE BLACK BARS GOING UP
ARE ESSENTIALLY THE AMOUNT BY
WHICH UNEMPLOYMENT WENT UP IN
PERCENTAGE POINTS, AS YOU CAN
SEE ON THE LEFT.
THEN YOU LOOK OVER ON THE
RIGHT, AND YOU SEE OUR LITTLE
TURQUOISE BAR, WHICH ACTUALLY
SHOWS UNEMPLOYMENT GOING DOWN
OVER THE LAST TWO QUARTERS.
COMPLETELY CONTRARY TO A RECESSION.
AS YOU CAN SEE, 3.6 PERCENT
UNEMPLOYMENT RATE.
JUST LAST MONTH WE CREATED
372,000 NEW JOBS, 2.8 MILLION
NEW JOBS THIS YEAR.
THIS IS NOT A RECESSION THAT I
HAVE EVER SEEN, AND THEREFORE I
DON'T REALLY THINK, AND NOBODY
REALLY THINKS THIS IS ACTUALLY
A REAL RECESSION.
>>> ON YOUR LAST CHART, THE
LAST SIDE OF THIS, WHAT MAKES
IT FEEL LIKE IT IS TECHNICALLY
A RECESSION OR NOT, IS THE COST
OF THINGS.
IT IS TOO EXPENSIVE TO GO OUT,
AND YOU ARE SEEING THAT IN
CONSUMER CONFIDENCE.
>> YES. LOOK, THE ECONOMY IS NO
DOUBT WEAKENING, AND THAT IS
PART OF THE PLAN.
WE HAVE TO BRING DOWN THIS
INFLATION.
THE ONLY WAY KNOWN TO MAN AND
ECONOMISTS IS TO REDUCE DEMAND
FOR WHICH COULD EVENTUALLY LEAD
TO SOME UNEMPLOYMENT, BUT JUST
GET PEOPLE TO SPEND LESS.
INFLATION UNFORTUNATELY HAS
BEEN TAKING THAT TALL.
SO THE CHART ON THE LEFT, THIS
IS INTERESTING NUMBERS THAT
JUST CAME OUT IN THE LAST DAY
OR TWO.
WE HAVE SEEN A LOT OF CONSUMER
CONFIDENCE NUMBERS OVER THE
MONTH.
THEY ARE PRETTY TERRIBLE, QUITE
FRANKLY.
THIS PARTICULAR INDEX ISN'T
EVEN AS BAD AS SOME OF THE
OTHER ONES THAT ARE OUT THERE,
BUT YOU CAN SEE THAT WE HAVE
HAD A FAIRLY STEADY DECLINE IN
CONSUMER CONFIDENCE FOR SEVERAL
MONTHS.
WHAT MAKES THIS CHART A BIT NEW
AND INTERESTING, PERHAPS, TO
THE VIEWERS, IS THAT ON THE
RIGHT, THIS CHART ACTUALLY, OR
THIS INDEX IS BASED ON FIVE
DIFFERENT SUB- INDICES THAT
HAVE ALL BEEN AGGREGATED.
ONE OF THE THINGS THEY DO IS
BRING A QUESTION TO CONSUMERS
OF HOW YOU FEEL NOW ABOUT THE
JOB MARKET, AND HOW DO YOU
THINK IN THE FUTURE?
WHAT YOU CAN SEE ON THE RED
LINE IS THAT AT THE MOMENT,
CONSUMERS FOR OBVIOUS REASONS
FEEL PRETTY DARN GOOD ABOUT THE
JOB MARKET.
THEY FEEL THAT THERE ARE PLENTY
OF JOBS OUT THERE.
WHEN YOU LOOK AT THE BLUE LINE,
THEY ARE VERY PESSIMISTIC ABOUT
THE FUTURE.
AS WE ALL KNOW, ELECTIONS ARE
ABOUT THE FUTURE.
WE ARE FACING AN ELECTION.
THIS KIND OF A SPREAD IS NOT
GREAT FOR DEMOCRATS GOING INTO
THE ELECTION, AND WE REALLY
OBVIOUSLY NEED TO HELP THE JOBS
CONTINUE TO COME AND STRONG,
AND WE GET SOME KIND OF A
REVERSAL OF THAT BLUE LINE,
PEOPLE'S EXPECTATIONS ABOUT THE
FUTURE BEING QUITE NEGATIVE AT
THE MOMENT.
>> STEVE, A COUPLE QUESTIONS
ABOUT THE LIVED ECONOMY.
WHAT IS GOING TO HAPPEN TO
INTEREST RATES ON CAR LOANS,
CREDIT CARDS, AND WHERE DO YOU
SUPPOSE ALL THE WORKERS ARE?
>> WELL, ON THE FIRST QUESTION,
MIKE, THEY ARE GOING TO GO UP.
WE HAVE TO BE REALISTIC ABOUT
WHAT'S GOING TO BE REQUIRED TO
BRING DOWN THAT 9.1% INFLATION.
WE HAVE 75 BASIS POINTS, THREE
QUARTERS OF A PERCENTAGE POINT
IN LAYMAN'S TERMS INCREASE THIS
WEEK.
THE MARKET IS EXPECTING MORE
INCREASES BEFORE IT FINALLY
TOPS OUT.
MORTGAGE RATES HAVE GONE
ROUGHLY FROM 2 3/4% TO 5 1/2%
FOR A 30 YEAR MORTGAGE.
AS I SAID, THAT HAS ALREADY HAD
AN EFFECT ON THE HOUSING
MARKET.
YOU WILL SEE OTHER INTEREST
RATES FOLLOW SUIT.
THIS IS SORT OF ECONOMICS 101.
HIGHER INTEREST RATES MEAN
PEOPLE BORROW LESS, WHICH MEANS
THEY SPEND LESS.
IT IS PAINFUL.
IT IS NOT FUN FOR ANYBODY, BUT
UNFORTUNATELY IT IS THE PRICE
WE PAY FOR HAVING BEEN A LITTLE
BIT TOO EXUBERANT WITH OUR
STIMULUS, BOTH FROM THE FED AND
FROM THE CENTRAL GOVERNMENT
OVER THE COURSE OF THE PANDEMIC
AND DURING THE RECOVERY.
THE QUESTION IS, CAN WE LAND
THIS PLANE?
NOT SUPPORTED BY HISTORY.
HISTORY WOULD TELL YOU THAT WE
ARE NOT SOPHISTICATED ENOUGH TO LAND THE PLANE.
LAND THE PLANE.
IT WOULD BE A BIT LIKE AN
AIRLINE PILOT LIKE ME TRYING TO
LAND ON AN AIRCRAFT CARRIER.
YOU MIGHT GET LUCKY, BUT MORE
THAN LIKELY YOU ARE PROBABLY
GOING TO HAVE A BIT OF AN
UNPLEASANT EXPERIENCE, AND I
THINK WE HAVE TO PREPARE
OURSELVES FOR THAT POSSIBILITY.
>> STEVE, I HAVE FAITH IN YOUR
PILOTING ABILITIES.
THERE IS GOING TO BE MORE
LEGISLATION COMING.
DEMOCRATS BELIEVE THEY CAN GET
THIS RECONCILIATION PACKAGE,
ANTI-INFLATION IS RIGHT IN THE
NAME.
BUT FROM WHAT YOU KNOW OF IT
AND WHAT IT PLANS TO DO, WHAT
SORT OF IMPACT WILL IT ACTUALLY
HAVE?
>> FIRST, THE MANSION-SCHUMER
PACKAGE, WHATEVER YOU WOULD
LIKE TO CALL IT, I THINK IS AN
EXTRAORDINARY ACHIEVEMENT.
I THINK TO HAVE PULLED BACK
FROM THE JAWS OF DEFEAT, BUT TO
PRODUCE A PACKAGE THAT ACTUALLY
REDUCES THE DEFICIT IN A
MEANINGFUL WAY FOR THE FIRST
TIME IN 11 YEARS, AND THEREFORE
PRESUMABLY HAVE SOME POSITIVE
IMPACT ON INFLATION AS WELL AS
GETTING CORPORATE TAXES
PRIVATELY SORTED OUT AS WELL AS
PRESCRIPTION DRUGS -- ALL THAT
STUFF IS QUITE AMAZING.
BUT WE HAVE TO BE REALISTIC
THAT THESE ARE ALL SMALL THINGS
RELATIVE TO THE SIZE OF THE
INFLATION PROBLEM.
THERE ARE OTHER SMALL THINGS
THE PRESIDENT COULD DO THAT SO
FAR HE HASN'T DONE RELATIVE TO
THE SIZE OF THE INFLATION BUT
THEY ARE SMALL RELATIVE TO THE
SIZE OF THE INFLATION PROBLEM.
WE HAVE A VERY SIGNIFICANT
INFLATION HOLD, IF YOU WILL.
BUT EVERY LITTLE BIT OF DIGGING
OUT IS HELPFUL, AND WE SHOULD
CONTINUE TO TRY TO DIG
OURSELVES OUT.
EVERY LITTLE BIT WE CAN DIG
OURSELVES OUT BY POLICIES LIKE
THESE TAKES SOME PRESSURE OFF
THE FED.
MEANS INTEREST RATES DON'T HAVE
TO GO UP QUITE AS MUCH.
BUT I DON'T WANT TO HOLD OUT
FALSE HOPE THAT YOU ARE GOING
TO SUDDENLY SEE A MEANINGFUL
DROP IN INFLATION SIMPLY
BECAUSE THEY PASS THIS
RECONCILIATION BILL.
>> EXCELLENT EXPLANATION OF
EVERYTHING GOING ON RIGHT NOW.
STEVE IS BEING HUMBLE.
HE WAS ACTUALLY THE TECHNICAL