AFTER A WEEK OF HUGE ECONOMIC
DEVELOPMENTS.
THE FEDERAL RESERVE HIKING
INTEREST RATES BY ANOTHER 75
BASIS POINTS AND GDP SHRINKING
BY 1% IN THE SECOND QUARTER
BRING THE U.S. INTO A RECESSION
AND THE INFLATION HOTTER THAN
EXPECTED AND PRESIDENT BIDEN
TOUTS AN ALMOST $370 BILLION
SPENDING PLAN TO COMBAT THE
CLIMATE CRISIS.
JOINING ME RIGHT NOW IS THE
FORMER ACTING CHAIR OF THE WHITE
HOUSE COUNCIL OF ECONOMIC
ADVISERS TYLER GOOD SPEED AND
ANDY PUTZER.
GENTLEMEN, GOOD TO SEE YOU AND
THANK YOU FOR BEING HERE.
TYLER, I’LL START WITH YOU AND
TAKE A LOOK AT THE WEEK THAT
WAS.
FEDS RAISING RATES 75 BASIS
POINTS AND ALL THE ECONOMIC DATA
GDP AND TAKING US INTO RECESSION
AND HOW DO YOU ASSESS THE WEEK
THAT WAS?
>> YES, THERE WAS A LOT GOING ON
AND A LOT TO DIGEST.
LOOK, I WAS TALKING WITH ONE OF
THE MEMBERS OF THE NBER
RECESSION DATING COMMITTEE
EARLIER THIS WEEK.
I DON’T THINK THEY’LL OFFICIALLY
CALL IT A RECESSION, BUT IN MY
VIEW, THEY LOOK AT DEPTH,
DURATION, AND DIFFUSION AND THE
DEPTH OF THE CONTRACTION THAT
WE’VE SEEN IN THE FIRST HALF OF
THIS YEAR IS ACTUALLY BIGGER
THAN THE RECESSION IN THE EARLY
2000S AND ABOUT THE SAME SIZE AS
THE CONTRACTION IN THE EARLY
1990S AND 1969 AND ’70.
IN DETERMINES OF DURATION,
THERE’S BEEN TWO QUARTERS AND
THE TECHNICAL DEFINITION OF
RECESSION AND IN TERMS OF
DIFFUSION, WELCOME UNDER THE
HOOD.
WE HAD A CONTRACTION IN BUSINESS
INVESTMENT AND A CONTRACTION IN
RESIDENTIAL INVESTMENT, A
CONTRACTION IN INVENTORIES.
WE HAD A CONTRACTION LAST MONTH
IN INDUSTRIAL PRODUCTION.
REALLY THE ONLY THING KEEPING
THIS SHOW ON THE ROAD IS THE
AMERICAN CONSUMER AND THE
AMERICAN CONSUMER IS STARTING TO
LOSE CONFIDENCE, THEY’RE
STARTING TO FLAG A BIT.
THEY’RE REAL INCOMES ARE
STARTING TO DECLINE.
I THINK THAT THAT’S GOING TO BE
A REAL DRAG MOVING FORWARD.
>> YEAH, IT’S A IMPORTANT POINT,
ANDY.
I WANT TO GET YOUR TAKE ON THE
CONSUMER.
YOU SAW SOME NEW NUMBERS ON
FRIDAY SHOWING US THAT
EMPLOYMENT COSTS ARE UP FOR
BUSINESSES AND WHILE CONSUMERS
ARE SPENDING, THEY ARE GOING
INTO THEIR SAVINGS ACCOUNTS TO
PAY FOR ESSENTIALS LIKE FOOD,
FUEL, AND RENT.
>> YEAH, SAVINGS ARE DOWN.
REAL INCOME HAS BEEN DOWN FOR,
YOU KNOW, OVER A YEAR NOW.
WE’VE SEEN WAGE GROWTH BELOW THE
INFLATION RATE, WHICH JUST --
YOUR CHECK IS BIGGER AND THE
AMOUNT OF MONEY YOU HAVE TO
SPEND IS LESS AND THE NUMBERS
THAT CAME OUT ON FRIDAY SHOW
THAT REAL DISPOSABLE INCOME IS
THE AMOUNT OF MONEY PEOPLE HAVE
TO SPEND AFTER TAXES HAS
AFFECTED BY INFLATION, WHICH IS
WHAT BUSINESSES WOULD LOOK AT,
WAS AGAIN NEGATIVE.
IT’S NEGATIVE FOR THE SIXTH TIME
THIS YEAR, WHICH IS A REAL
DOWNGRADE IF YOU’RE AN AMERICAN
BUSINESS, YOU’RE GOING TO BE
CONCERNED ABOUT GROWING AND
YOU’RE GOING TO BE CONCERNED
ABOUT ADDING EMPLOYEES BECAUSE
IT LOOKS LIKE PEOPLE JUST DON’T
HAVE AS MUCH MONEY TO SPEND.
SO THE ECONOMY AS TYLER SAID,
WE’RE HEADING IN A BAD
DIRECTION.
>> WELL, I MEAN, LOOK, WHAT DOES
THIS LOOK LIKE?
HOW DOES A RECESSION PLAY OUT,
ANDY?
I KNOW THAT WE’VE ALREADY SEEN
JOB CUTS IN PORTIONS OF THE TECH
SECTOR ALSO.
SOME COMPANIES SAYING WE’RE
GOING TO PUT A PAUSE ON ANY NEW
HIRING.
WHAT ELSE FROM A PRACTICAL
STANDPOINT WILL YOU EXPECT AS WE
GET FURTHER INTO THE YEAR AND
PERHAPS CONTINUE TO SEE
RECESSION THEIR CONTRACTIONS?
>> WELL, A LOT OF THIS FEEDS ON
ITSELF AS YOU SEE CONSUMERS GO
NEGATIVE ON SPENDING AND
CONSUMER SENTIMENT GO DOWN AS
YOU SEE THE AMOUNT OF MONEY
PEOPLE HAVE IN THEIR WALLETS GO
DOWN.
THEY HAVE TO SPEND MORE AT THE
GAS PUMP OR AT THE GROCERY STORE
TO BUY ESSENTIALS, BUSINESSES
KNOW THAT THAT PEOPLE RUNNING
BUSINESSES ARE EXPERIENCING THE
SAME THING THEIR CONSUMERS ARE
EXPERIENCING, AND YOU SEE A LESS
OF AN INCLINATION TO FILL OPEN
POSITIONS, LESS OF AN
INCLINATION TO CREATE NEW
POSITIONS.
YOU REDUCE YOUR ORDERING, YOU
DON’T WANT TO BUILD UP TOO MUCH
INVENTORY BECAUSE YOU DON’T KNOW
IF YOU CAN SELL IT.
IT’S ALMOST -- YOU KNOW, IT CAN
BECOME A SNOWBALL ROLLING DOWN A
HILL IF THINGS DON’T GET UNDER
CONTROL BECAUSE BUSINESSES REACT
WHEN THEY SEE CONSUMERS REACT,
AND THAT DEFINITELY IS WHAT’S
HAPPENING IN THE ECONOMY TODAY. >> SO WHEN DO YOU EXPECT GROWTH
>> SO WHEN DO YOU EXPECT GROWTH
TO RETURN, TYLER?
>> I -- MARIA, I THINK WE’RE
LOOKING AT 2023 BECAUSE LET’S
LOOK AT COMPONENTS THAT GO INTO
GDP.
EXPORTS, I MEAN THE REST OF THE
WORLD IS PRETTY WEEK.
WE HAD A DECENT -- WEAK.
WE HAD A DECENT QUARTER AND THE
REST OF THE WORLD IS NOT LOOKING
GREAT.
INVENTORIES THERE WAS A BIG
OVERBUILD IN 2021 AND THAT’S
GOING TO BE DISSIPATING
THROUGHOUT THIS YEAR.
RESIDENTIAL INVESTMENT IS REALLY
STARTING TO SLOW DOWN IN A BIG
WAY, AND I DON’T SEE THAT
REBOUNDING ANY TIME SOON.
BUSINESS INVESTMENT I DON’T SEE
THAT RECOVERING IN A RISING