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Let's go to join Sue, University of Michigan Surveys of Consumer Director. Let's talk about this umished data, Joanne, a little bit weaker than expected on the surface.
What can you tell us?
So it came in a little bit weaker, It declined from last month, but it was actually a very pervasive drop. We sought across all demographic groups. Republicans, Independence, Democrats alike. All declined from last month and very much. So this is a worry about inflation coming back in the year ahead.
Yeah, speaking of that, I mean that one year inflation expectation ticking up to four point three percent. That's one hundred bass points higher than what was estimated and the prior read that seems very significant.
Can you walk us through that?
Absolutely, So this is a huge jump. We very rarely see such a huge one month jump in year ahead inflation expectations. So overall consumers are just really worried about the negative impacts of tariffs, and they're really expecting tariffs to yield quite a bit of inflation in the year ahead. We're seeing a little bit of movement on the long run. I think consumers are waiting to see how things unfold before they really update their expectations over the long run.
And again, the emish current conditions came in at sixty eight point seven. Consensus was seventy three point seven. Last period was seventy four. What's the again? Kind of a big drop? Does that surprise you the magnitude of the drop.
The main reason for the dropping current conditions is that buying conditions for durables really plunged this month. And the main reason for that is that over the last couple of months, a lot of consumers spot like you needed to buy durables now to avoid price increases in the
future because economic policy like tariffs. However, with tariffs on imminent the ones on China already implemented, people are kind of getting concerned that it's already too late to avoid those high prices for durable So that's why current conditions really took a time.
Very good joined Sue.
Thank you so much. Joined Sue.
She's the Surveys of Consumers Director at the University of Michigan.
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You got those jobs numbers today and the immediate reaction in the market, in particular that you Mish sentiment which is the weakest, and seven months inflation expectations moving one hundred basis points higher for the next year. Joining us now, Lindsay paeisga is a chief economist.
Over at Steefel.
Can we just talk about the U Mish numbers for a second and the reaction within the market and that big jump in inflation expectations.
What do you make of that?
A concern for the market recognizing that inflation is likely to prove much stickier in nature than the Fed had
previously anticipated. And this not only calls into question the Fed's earlier decision to stop short of what we've long argued should have been a much higher terminal level, but it also calls into question now the Fed's ability for further downside relief, and so you see the market responding to that, with yields pushing higher this morning after this morning's jobs report and the confidence report.
So, lindsay, what did you take away from the jobs report this morning?
Well, it was somewhat disappointing on the headline, no doubt, falling to a three month low in terms of that monthly job creation number. But what we see is a lot of that was likely weather related weakness. And when we look at the other components that strong upward momentum, a stronger than expected monthly jump in average hourly earnings,
the unemployment rate taking down to an oppressive four percent. Again, this continues to set the stage, or set the tone of tight ish labor market conditions, supporting the Fed's assessment, as we saw in that January FOMC statement that Committee members are moving away from concerns of emerging weakness on the labor market side and conceding now that labor market conditions are likely to remain not only stable but solid going forward into twenty twenty five.
The risk, though, has to be the TEARFF question. I forgot to turn on my mic. I love that I knew that on a Friday, and you saw that in you mish. Like both groups from both sides of the aisle, are worried about inflation expectations related to tariffs, particularly when it comes to say, durable goods and buying them now rather than later. We also saw wages take up in the jobs number. All of that is an inflationary spiral.
No, well, it can be. It depends.
Tariffs in and of themselves are not inflationary if we're talking about a one time price increase, but they absolutely can be inflationary if they result in this tit for tag retaliatory cycle that we saw during Trump's first term back and forth with China. So again it's going to depend on the scope and the intensity of these programs.
But also from an immigration standpoint, policies that further restrict the labor supply in this country could exacerbate the already present divide between labor demand and labor supply, and as you mentioned, continue to put upward pressure on wages. At the same time, the administration has talked about raining in the size of government, reducing outlays, finding areas of waste and inefficiencies which could more than offset some of those
inflationary pressures in the marketplace. So it remains a big question mark, but it does appear that investors looking at markets reaction, it does appear that investors are concerned about the upside risks to inflation at this point.
So, putting all that together, Lindsey, what's your view of the consumer right here?
Well, I think the consumer is still very solid. The consumer continues to prove very resilient in the fame of a difficult environment, years of elevated prices, elevated borrowing costs,
the resumption now of student debt payments. That being said, there are a lot of challenges facing consumers potentially further higher prices or further increases in borrowing costs at this point, but we also have to look at the fact that consumers are incredibly savvy and with real growth in income excuse me gaining momentum, as well as access to other supplemental factors like four oh one k's hardship withdrawals credit cards, it's clear that consumers still have a good amount of
spending and borrowing power left. But again, those challenges are very real as we look further into the new year.
All right, Lindsay, thank you so much. Really appreciate it.
Lindsay Pieza joining us chief economist over at Steefeld.
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One stack we're watching today is Huntington Bank shares. Over the last two days, they're up by about one percent. They had an investor day yesterday where they laid out their strategy for the next few years and where their growth opportunities are, and the market took it really well. Zach Wasserman is chief financial officer at Huntington, a national bank, and he joins us here in the studio. Thank you so much for joining us. We appreciate this.
It's a pleasure to be with you.
So I think Huntington, and I think a company that lends a lot to average people and small businesses and sort of knows.
The economic roots.
But you guys are also trying to expand that and become something different.
Can you walk me through that?
Sure? Yeah, you know the businesses.
We've been performing exceptionally well recently, and one of the reasons is because we're driving expansion both geographically and in our commercial business, expanding in a number of special de
vertical areas and national business lines. Just this year, we've launched into three new states, North Carolina, South Carolina, and Texas, and we've also established eight new specialty verticals that are national for example of funds financed vertical that's supporting private equity clients, one that's focused on the mortgage ecosystem, and other national commercial areas.
Talk to us about loan growth, what I do know about the bank of business.
That's an important driver. So talk to usbout loan growth, where it's coming from, where.
You're seeing it, and is it kind of in line with what you were expecting.
You know, we've actually had very strong loan growth of the last two years. If you take us to back, much of the industry has been in a pretty neutral position, not actually growing. Huntington has grown outperformed that by about
ten percentage points. And for us, the growth is coming from both our core business, which is consumer small business, and then mid corporate typically private commercial clients, and then also these new initiatives that I just mentioned before launching into three new states, a number of specialty businesses.
So we're seeing a nice breadth of growth.
Actually, one thing that's actually you know, a nice indication of the economic strength as we're seeing strong demand from small businesses from our regional banking business, typically in the kind of smaller middle market client set. So it's a it's been a healthy dynamic we've been.
Seeing before you were in this position.
You also was chief financially financial officer to Visa, and I know that Huntington is trying to get into the payments business in a particular way too. What's the what's the market for that? And how do you guys play and compete in that?
You know, the market for payments is incredibly broad, and if you think, if you took a.
Step back to categorize it, actually like is that zell or like what is that?
You know, it is so broad. The one that really needs to to zoom into it.
You know, we have a number of card based payment products, so think consumer cards, commercial cards, but also importantly treasury management, and that's really the biggest driver right now we're seeing in payments growth supporting commercial clients with the ability to accept payments and then make payments in essentially every form you can imagine, Alex, so big big growth driver there. One of the things that we've done recently is invest
to expand our merchant acquisition capability. Merchant acquiring is when a company accepts payments electronically, and it's often the lynchpin of their business. The lifeblood of the company is how they accept payments. So we launched a merchant acquiring business just in October and it's been going incredibly well. So, you know, kind of almost every area there's growth in payments for sure, but for US treasury management and commercial payments in particular as a major growth driver.
Talk to us about your long portfolio, specifically your exposure to.
Office, yeah, real estate.
You know, office and commercial real estate generally for Huntington is a very small exposure. Actually, typically for large regional banks, the average commercial real estate within the loan portfolio might be fifteen or twenty percent of the loan book. For US, it's nine percent, so we're relatively smaller. In a office is only one percent of that nine Give you a sense. With that being said, you know what we're seeing in that commercial real estate environment is this is gonna this
is gonna be a situation that plays out over multiple years. Thankfully, we are seeing a fairly orderly process of refinancing and generally seeing pretty sound ability for our commercial real estate developers to maintain their financing and to successfully roll through maturities.
But it'll take a while to run through.
To give you a sense, something like twenty percent of the portfolio matures any given year, so this will be you know, on average, it will take five years to.
Really roll through.
So I think that's a kind of an industry dynamic we're seeing, which this is a dynamic that will play out.
Over quite sometime.
What part of this encompasses any kind of M and A versus organic I guess you know, for.
Us, we're focused on organic growth. You know, M and A.
It can be a tool for banks to grow, certainly, we've seen m and A in the industry over time. With that being said, it can also be distracting to
the progress that the companies making on organic growth. And for us Alex we're seeing so much progress on our organic growth initiatives, both acquiring customers but also importantly putting more and more focus around the value added fee services that come around that come to them, namely payments, wealth management, and capital markets, and so, you know, just the customer acquisition. We're seeing the success in those businesses. That's where our
focus is. To give you a sense in the fourth quarter just that we just closed a ten percent year over year revenue growth really driven by those organic strategies.
What's a typical corporate customer for you guys?
You know, often, Paul, they are middle market companies that are private.
That's the most typical company, you know.
You know, the regional banks serve a really important niche within the overall US economy because you know, the client set that we are servicing are typically you know, focused on their local market.
They want a bank with a.
Company that is deeply embedded in the community and knows them personal, but importantly can bring down to them the power of a large bank in terms of specialized capabilities. It's actually one of the reasons why we've been so successful in these new geographic launches.
How about private credit? Is that a competitor to you? No, It's funny.
We get this question all the time and the answer generally is no. Okay, you know, private credit is looking for the sort of you know, the kind of loans that they finance are typically where there's more leverage, where there's more yield to be had. Because of the risk,
that's not the core client for Huntington. And so we actually were up on stage at our investor day yesterday and our head of Commercial Business mentioned that only in two cases last year across our entire business did we see commercial borrowers actually go to a private credit facility away from our own lending facility.
All right, Zach, thank you so much. We appreciate that.
Zach Wasserman, chief financial office of Huntington National Bank located in Columbus, Ohio, Miller Columbus, Ohio as well.
So he's still banks there even here.
Well, he's a player.
I think it's just this is old, this is a Miller account.
Okay, this is different. Gotcha.
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Right back to the market and what we're seeing right now.
We saw the job's number coming a little bit of a disappointment, but then we had revisions higher. So the idea was that relatively neutral for the jobs world. Average hourly earnings though beating expectations, and then we got you missed around ten and that really jolted markets as well, falling to the lowest and seven months. Also, the inflation expectation for one year rose one hundred bases points.
It was a very big jump. We wanted to get.
More into all of this and sort of encapsulate what is happening within the jobs market. Kate Dushane is CEO of RGP joining us.
What was your biggest takeaway?
Well, I think this job's report really a mixed bag. We saw some numbers moving lawyer lower, as you said, but also others getting revised higher. So I think it's it's fairly neutral given the pressures from the LA wildfires and some of the frigid weather that we've all endured in January across the country, so we have to just keep watching what's happening in the couple of months to come.
So, Kate, I guess one of the big issues is what this might mean just from an overall labor market. But my takeaway would be, I've got a market that seems at four point one percent, it feels kind of fully employed. I've got wages that are rising faster than inflation. Is that what you see when you when when you talk to your clients out there in terms of their view of the labor market.
Yeah, I would still say this is a really strong labor market. I think we have seen in our client base employers or excuse me, employees staying put. So as companies now are starting to increase some of their transformation projects again, they're turning to other labor sources like outside talent to supplement the teams that exist within their environments.
One of the biggest outside risks right now, like the impact of terrorists, for example, the unknowns that we think are coming.
How does it transmit into the jobs market.
Right Sorry about that. Unknowns make everyone nervous and that can be a dampening effect on the labor market. But there's also tremendous pent up demand in terms of innovation, technology transformation, digital transformation that's happening in our client base. There's a push around cost cutting and supply chain optimization. Those pressures in a business don't go away. So we have some countervailing I would say pressure is happening in
the marketplace that we see in our client base. I would say, on the average, we are cautiously optimistic that the environment for labor continues to improve throughout twenty twenty five. But there are uncertainties related to Trump's trade policies and immigration policies, and how they all play out and what the timing is will certainly impact what is the ultimate outcome?
Kate.
Yeah, you mentioned immigration, and as this administration begins to perhaps implement some changes, what kind of impact do you think that could have. If there's in fact lower immigration, maybe even forced deportations, how do you think that will be felt within the labor market.
Well, it'll certainly impact certain sectors of the labor market in certain industries.
You know, our.
Business is primarily professional services. You are looking at professional and business services. Talent pools, and those, especially in this hybrid environment, can often be delivered remotely, and we can tap into labor pools that are global in nature. But things like retail or construction or healthcare workers that have to be on site. I think some of these immigration policies will create supply and demand problems and put more pressure there.
What about Doge.
We just heard Scott Beson talking about Doge. If we cut a boatload of government workers, doesn't that just lead to so much supply in the labor market and just really tick that unemployment rate higher.
Well, it depends on the skill sets that are coming out of that environment. So we need to learn a lot more before I think we decide what the impact will be. You know, typically about six percent of federal workers retire or resign in a typical year. It's looking like that could be much much higher given the activities
that we're listening to around Doze right now. But it's really going to depend on what are the skill sets coming into the marketplace and are they the kind of skill sets that private industry is looking for to decide what impact might.
Come an old topic, but one I like revisiting is the whole hybrid work thing. What do you are you seeing any trends evolving here or is it kind of set in stone? Hybrid three four days? Is that kind of the new normal now?
We really believe it is, and that's supported by a recent Gallup poll that said hybrid has really landed in the economy. Here, and we see that to be true in our client service. I'd say the only industries where that maybe is less true is in financial services, which tends to want people on site. We saw that with the JP Morgan announcement last month, and healthcare certainly has
been more on site than others. But otherwise, you know, we think about seventy five percent of our clients are solidly in the hybrid camp.
You have like twenty years of experience working with C suites and helping them to manage transformation initiatives. So what's your best guess on what happens with DEI.
So thank you.
I mean, we've certainly all been reading lots of headlines about what's happening around DEE and I I think what's getting lost is that businesses can deliver the best results for their customers or clients when they can attract the smartest and innovative talent from a wide range of backgrounds and experiences.
And that's what we focus on.
It's really about what are the skill sets and perspectives you need for the best problem solving and fostering an environment where employees can do their best work is how businesses will compete and win and that's what we focus on. It's really about problem solving and getting different perspectives.
Is AI a do you think is a net positive for employment or net negative? A lot of folks saying, Gee, it may take some jobs away from from individuals, but then others say, no, it's just simply going to improve their.
Potential. How do you think about it?
Yeah, I am more of an optimist that AI is going to bring more productivity and I actually think more engagement in the workforce. That, however, requires that people be willing to upskill and I think reskill a little bit.
Certainly, there are.
Jobs that are very task oriented and repetitive task oriented that could be very disrupted by AI. But moving into more business analytics, project management, technology skills, coding skills, I mean as long as workers are willing to engage in some skill set acquisition, I think by and large, we need AI to play a role as the digital worker or we will not achieve the productivity goals that our economy needs.
Kate, we really appreciate it.
I don't envy how difficult this time must be for you your clients at Kate Dushane, CEO of r GP, joining us from California.
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Yeah