You're listening to the Bloomberg Opinion podcast count US Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we look at why the American public doesn't hold a lot of faith in scientists and researchers, as well as other traditional institutions in the US. What could have happened to damage that trust on such a profound level. We'll also look at how the US economy needed a second wind
and got one from Barbie Oppenheimer and Taylor Swift. And then we'll explore a new trend in restaurants, laboratory kitchens and how they can help you help the world be a better place. But we begin with the American consumer who seems unhappy. But why inflation is down? Consumers are spending in spite of rising interest rates, and we could get more of a market boon with rate cuts that may be coming next year. Federal Reserve chair J Powell said last month that the US economy is still growing.
Recent indicators suggests that economic activity has been expanding at a strong pace and well above earlier expectations. In the third quarter, real GDP is estimated to have risen an outsized annual rate of four point nine percent, boosted by a surge and consumer spending.
So where is the disconnect and why the discontent? Well, let's find out. Bloomberg Opinion colonist Connor Sen joins us now. He is the founder of Peachtree Creek Investments and Connor, we've seen rapid job and economic growth, but the American consumer is reportedly unhappy. Where's all this coming from.
Well, I think it's a puzzle we've all been trying to figure out because you would say, we've added millions of jobs since the pandemic, the unemployment rates below four percent.
GDP growth has been robot.
Consumer spending has recovered a lot, like people should be happy, and they're not. And so it's a questionable why is that? And you know, I think inflations, certainly in twenty twenty one and twenty twenty two were big factors. And even though inflation has come down a lot this year, it's fair to say, well, maybe prices are still up a lot versus two three years ago, so they're still.
Mad about that.
And I think the fact that even though inflation has come down, interest rates have mostly risen this year, and so mortgage rates ticked up to eight percent in October. And even if not everybody is buying a house or buying a car all the time, it's just annoying when consumers, American consumers in particular, can't borrow the way they like to.
And so that's why I wrote this column.
And I think there's reasons to think a lot of these things that have annoyed people, that are persisted for two or three years could be reversing. And it'll be a good test to see if lower mortgage rates, cheap energy, and sort of consistently lower inflation are enough to turn the vibes around.
Okay, that's interesting. You believe consumers would be more welcoming of a slow growth environment, not a fast growth, and that that would make them more satisfied. But it does sound on the surface kind of the opposite of what you might.
Expect, and maybe there's something to be said for, you know, growth being too fast versus just right. And it's the kind of thing where an econos might say, well, even though your costs are up twenty percent, your wages are up twenty three percent, so you're somewhat better off. But no one really thinks that way. They think, well, I earned the rays I got, and then this inflation is just something annoying I have to deal with. They don't think about the two being linked. And so, you know,
people might be happy in the late twenty tens. They were happier when wage growth was three percent, but inflation was two and so maybe that kind of environment in twenty twenty four, with lower interest rates could put people at a better mood.
So now you are saying that that an economic slowdown is likely coming. So let's see how these consumers respawn in a different environment.
Yeah, and I think right now, I don't think we're going to have a recession, but growth looks to be slower. Job growth has come down limit rate, it's closer to four than in the low threes.
We see.
Inflation has certainly come down. And so let's see how people like this environment. And we saw this month that consumer confidence rose this month for the first time in four months, even though growth is slower in the fourth quarter than it wasn't the third.
So is that the consumer reaction you've been watching for. What does all this tell you, Well.
I think it's sort of again suggests that people.
I mean, it's great that we got the unemployment rate back to pre pandemic levels, but the way in which we got there still wasn't the best ride for people. And going forward, since I do think we are going to have slower growth and hopefully lower energy prices, I believe, lower interest rates, I think it's reasonable to think that
that confidence will tick up. And that's sort of the test to see, you know, is it really bit about that that people didn't like the inflation, didn't like a lot of the pressures we've had over the past few years, and a more normalized environment with cheaper energy and lower cost to credit is what they've been waiting for.
And we are talking with Bloomberg opinion columnist connorson about consumer sentiment and what it will take to satisfy the consumer and Connor, you just mentioned lower energy prices, lower prices at the pump, lower prices to make your home warm in these winter months, and you mentioned the lower cost of credit. Are there other benefits that come along with it that the consumer would be looking for?
I think it will help the own freeze in the housing market. And it's sort of the housing market, it's like, how is it doing? And I think there are a lot of ways you can in which you could say it's really strong because inventory is still very low, prices are very high. If you're a homeowner and you locked in your mortgage rate a few years ago, you're sitting pretty.
But it's also very dysfunctional. We have the lowest existing home sales in twenty or twenty five years on some measures, fewer home sales now than at the worst period of the financial crisis, which is kind of ridiculous. Affordability is the worst it's been in forty years, and so if
you're trying to buy a home, it's been terrible. And I think that lower mortgage rates and could sort of get people to first help supportability, but also if you are looking, if you have a low mortgage rate or looking to move, well, maybe mortgage rates in the sixes, even though it'ld be a higher mortgage rate, maybe that's enough to get you out of your home, willing to make that move for a better job, for family reasons, what have you, and just sort of make the market
more functional again, and I think that would sort of make people feel better. Even if it's you know, maybe not as hot of a housing market as it was in the past, you call it dysfunctional.
Does that lead then to volatility or unpredictability? Is that what makes this so hard?
Definitely?
I mean, because you had when COVID hit, sort of looked like the housing market might crash again, and then by the end of twenty twenty into twenty twenty one, we had six million existing home sales, which is about as high as it ever gets. And then right now we have existing home sales a little bit below four million, So it's a thirty thirty five percent decline and that's really tough if you're just a homeowner or someone looking
to buy a home. But it's also terrible if you're a realtor or someone who's a home decorator or a mover or a loan originator. It just you went from a boom to a bust. People are losing jobs and it's just very uncertain about what the next three months looks like, let alone the next year, because there has been so much volatility in the housing market and mortgage rates.
So I think a.
Period of stability with maybe mortgage rates in the sixes would feel great compared to what has been like the past few years of the roller coaster.
But what are the signs that tell you a slow growth environment or at least a stable a more stable environment is on the way.
Well, So growth is looking right now in the fourth quarter about two percent, which is down from five and Q three, So that's two sort of normal that the kind of growth we had in the twenty tens. Again, energy prices have already come down. Oil prices are probably as low as they're going to get outside of recession, just because we see that producers tend to want to
cut back when prices get much lower. And now with the inflation data we've gotten in recent months and some tea leaves from the Federal Reserve, it looks like they're going to be cutting rates as early, potentially as March or next year. And you're seeing that the bond markets are responding to that. Mortgage rates have dropped from eight
percent down to seven point two percent or so. So there's reason I think we're finally going to make some progress on the interest rates side, which we haven't done, you know, since this recovery.
So going forward, let's look toward the first quarter of twenty twenty four. You are saying that we are expecting an economic slow down, that is something that is going to give the consumer more confidence or will they just be more satisfied with a more stable environment.
I think they want both right now. I think just stability is what people want. Lower prices. Stable prices are what people want, lower interest rates. The inflation's in bad, the unpredictability's been bad, the volatility has been bad. People just don't want to have to think about this stuff. I might because I like, you know, to talk to you about it and write about it, to look at markets, but the average person just wants to know gas is going to be affordable and not move around too much.
When I'm looking to buyer sell my home, I get a reasonable rate. They don't want to have to think about changes in all of this stuff all the time. And I think just to the extent that all of this volatility can be on the back burner, people can focus on their lives and other things that would be a relief to consumers.
And just as an aside, we've been talking here on Bloomberg about the disconnect between the consumer sentiment and the actual economy itself. The economy is not bad right now, but the consumer sentiment doesn't reflect that. They feel like the economy is rough right now and making things harder for them.
Yeah, people feel like they deserve the wages they have and the job they have today, but they want the prices they had in twenty nineteen, and that's fair. You know, people want loss of government services and low taxes.
We all want to have our.
Cake and eat it too, sure, And I think when the pandemic hit, a lot of disruption occurred, and there's a lot of uncertainty about what it would mean. We didn't know if we'd get vaccines or how things would shake out. And policy makers responded the way they did. And you could argue about the choices we made or the path we took to get here.
But I think all things considered, it's not bad.
But we want to put that volatility and uncertainty behind us and just get back to normalcy. And I think we're getting there.
So just before we go Connor, the volatility and the uncertainty is still sort of a residual effect then from the pandemic, which was by the way years ago, but we're still feeling that.
Yeah, it's sort of even you know, Autobal prices are still higher than I think they will be a year from now because we still have a lack of inventory, producers trying to catch up supply chain things that are in the pipeline. The housing market is still digesting everything
that's happened. And then even if you know, maybe this month versus last month is stable, people don't adjust that quickly, and they're thinking about all the change that's occurred over the past three or four years, and it just takes a little longer to shake off all of the change that's happened.
Connor, thank you so much for taking the time with us.
Thanks.
Amy Connorson is a Bloomberg Opinion colonist and founder of Peachtree Creek Investments. And coming up, we'll look at a new poll. It's gauging Americans trust or lack of it in science, research and other traditional institutions. Stay with us, much more still to come. You're listening to Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast counts Saturdays at one and seven pm Eastern on Bloomberg dot Com. The iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion i Amy Morris. A recent Pew poll showed Americans trust and scientists fell during the pandemic years. More than a quarter of American surveyed say they are distrustful enough of scientists that they don't believe they'll act in the public's best interests. Want to get more on this now, Bloomberg Opinion columnist Faith Lamb, host of the Follow the Science podcast, joins me now and Fay. We talked about this before, but let's get into it
a little bit deeper. How did this come to fruition during the pandemic?
Well, I think that it has to do with the type of science that people were paying attention to during the pandemic, and that was science medical science that was really done on the fly, as well as public health, which mixes a lot of judgment, calls and values into scientific ideas.
And is that what we experienced? Then there were more suppositions and more hypotheses than actual scientific facts.
I think that was part of it. I think scientists and people in public health weren't always clear on what was a judgment call or a decision to say, do everything possible for a period of time to avoid spreading COVID. That was just a decision that was made in a lot of places that we would do everything possible, including locking down our cities. But it wasn't purely scientific decision.
Science can tell you how to achieve that, but it can't necessarily tell you that that's the goal we should have set for ourselves.
Yeah, there was a lot of debate I remember, between wearing masks don't wear masks. At the very beginning in March of twenty twenty, there was a whole thing about don't wear masks, it's not going to help.
And then well and it was Yeah, it was worse than that, because I think that what the real flip flop that was really damaging to public opinion was the flip flop on whether we should even worry about this at all. You know, there was a period of time when it was coming from the public health community, not from Donald Trump. You know, the don't panic, don't worry, the flu is worse. We were hearing that all through January and February from the public health community. And now
they say, oh, no, that was Donald Trump. But if you look back what people were saying, it wasn't they flip flop from telling us not to worry to very quickly turning around saying, yes, worry and stay home and wear a mask.
Now, were there any indications before the pandemic that trust in scientists and science was starting to falter, starting to wane?
Maybe? I mean, I don't consider that necessarily a problem, because I have interactions with scientists almost every day, and I don't think that as individuals they're any more or less trustworthy than anybody else. They're just human. They're people that have a job to do, and some people are extremely honest and some people are less so. But what makes science trustworthy is the methods of science that create
a reliable body of knowledge. It's not that the individual scientists are necessarily without conflicts of interest, or that they don't get things wrong, or that they don't get sometimes stuck on their own wrong ideas.
So how can the trust be rebuilt?
I think that the big problem isn't necessary that people don't have a kind of a blanket blind trust in scientists. They should ask if a scientist says something you should ask why, what's your evidence, what makes you say that, and why do scientists other scientists agree with you. I think that's legitimate. I think what we're seeing, though, is the growth of econom an irrational paranoia where people have a sort of knee your distrust of the whole thing
of everything that scientists have learned. And so I think there is a kind of a knee jerk reaction in the opposite way that people are feeling so disillusioned that they assume that if there was a clinical trial that showed a vaccine worked well, then they just don't believe it. That there's no amount of evidence that will convince them.
And we are talking to Blueberg opinion columnist Faith Lamb about Americans trust in science and what scientists can do to regain that trust. I was thinking, also, Fey, about the issue of vaccines. You just mentioned it, particularly the COVID vaccine. There are a lot of people to this day who will not get it, but that's not new. There have been debates over vaccinating kids for decades. Does this distrust of science date back to that or is that something else? Is that embedded somewhere else.
It's connected I mean there's trust in science, and then there's trust in doctors to recommend the right medications. I mean, you're talking about getting an injection, and and it does take a certain amount of trust when you're healthy to say, okay, im I let my doctor inject me with this. And so I think a lot of people have also been swayed by the fact that there are people who call themselves scientists and who even have scientific degrees who are
on the anti vaxer side. And so it may not be a matter of just getting people to trust science, but getting people to think critically about what to trust and why.
Okay, so when we go back and review what scientists were saying during the pandemic, and when we ask why they weren't more clear or why they were flip flopping, their reply is often that they simply didn't know at the time. This was all very new, So how can they give us proper guidance if they didn't know.
I think that you just have to play the long game in any area of science, and that means if you don't know, you have to admit you don't know, and then you have to say why you're making an educated guess on one side or the other, and why you think things are going to go a certain way or why you think you should err on the side of caution when.
You don't know.
But I think public health has a history of sometimes not being totally honest about their uncertainty because there's a sense of, you know, we have to get people to do this, and say, you know, the ends justify the means, So we have to lie a little bit to get
people to do the right thing, We'll do it. And I think that's a real difference between public health and just about any other area of science where part of the game is to recognize where you don't know things and measure your uncertainty, make sure that you understand your margin of error.
I just want to go back to something you just said. You're not accusing them of lying, You're not saying that they lied. Well, you know.
I did a podcast episode with Peter Sandman, who is an expert in risk communication, and the title was why
I public health officials sometimes lie? And Peter Sandman talked about what he calls the noble lie, the idea that well, you sometimes, you know, people think they're lying for the greater good, and he had some very good examples of places where it looked like that's what was happening, that people in public health were actually bending the truth or telling half truths as a way to try to push people or nudge people to do what they thought was the right thing.
That how could they ever rebuild trust if they lied?
That's a good question, I mean, Sandman his point was that this is a bad strategy. It's a bad strategy. That these problems tend to be long term, and you wear out your trust in a really bad way when you do try to tell half truths or pretend you know what you're talking about when you don't. That that is a problem. And so the other thing is, of course that scientists often just get things wrong because they're human, and that things get hashed out. So it's okay to
be distrustful of individual scientific claims. We should be, But when you have this you know, body of evidence and clinical trials and you know, I guess expert opinion that's informed by a lot of evidence, then at some point you kind of have to It's paranoid to think that that's all been somehow manufactured. It becomes crazy not to believe it.
Well, to that end, it's not just science, right, Trust in many institutions has fallen.
Yes, that's true. That's true. And I think scientists actually got higher marks for trusts than other institutions, whether they you know, whether they are more trustworthy. I think there is a little more emphasis in the press on exposing conflicts of interest among science and I think that's not a bad thing. I think it's that when people hear about a new study, it's good to inform people that there might be some conflicts of interest among the scientists making that claim.
All right, thank you, Faye for your time to appreciate it. Thank you. Bloomberg Opinion columnist Faith Lam host of Follow the Science podcast and Don't Forget. We're available as a podcast on Apples Spotify are your favorite podcast platform. This is Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
This is Bloomberg Opinion. I'm Amy Morris. For the past couple of years, the US economy has shown resilience revolving around demand for services that started to off this year. Then came Barbie and Oppenheimer and Taylor Swift. Welcome to the EARS tool. But even Taylor Swift and Barbie combined can't maintain that momentum, and spending on recreation services is dropping again. Let's talk about it with Bloomberg opinion columnist
Jonathan Levin, who focuses on markets and economics. John, let's start with the past two years in the demand for services. Was that the result of a pandemic shutdown? Or is that an oversimplification, Yeah.
Kind of, sort of. I mean, I think the story of the resilience of the economy over the past two years, even in the face of these extraordinary said hikes, was really about that pent up demand to a certain extent
for services and really the mean reversion of demand for services. Right, So, you know, even after we stopped buying new refrigerators and washing machines and all this stuff, we had this word trajectory in the economy overall, because the services economy is such a big part of what we do here in the United States, and it was steadily mean reverting, meaning
going up. As little by little we started going back to concerts, we started going back to movie theaters, and in a big way, we started going back to live sports, and so, yeah, I think that it was a confluence of factors. But what we really need to understand is it's true that the services economy did a lot of the work in keeping us out of a recession over the past two years.
Why is the demand for services waiting now? Is it just balancing it out?
Yeah, So I sort of think that what we saw was a little bit of a double dip, right, So we had this big recovery, you might call it a mean reversion, and then a sort of early twenty twenty three, demand for these services, especially recreation services, did start to wane. But in around summertime, we had this kind of special confluence of factors that gave us a little bit of a sugar high. We had the incredible marketing phenomenon that
was the Barbie movie. We had Taylor Swift on tour, and remember Beyonce was also on tour earlier in the year, and we had this, you know, in the backdrop was this continuing moderation, this continuing mean reversion. But now in terms of like the quantities of recreation services that we're consuming, Like adjusting for inflation, we have returned to twenty nineteen levels, So there is nowhere to go just in terms of
like pure mean reversion. We can't expect that to you know, be like an automatic boost to the numbers going forward. And Taylor's tour moved on from the United States of America. The Barbie phenomenon is over, and so you know, we're back into this sort of services, maybe not double dip, but double normal normalization as it were.
So how much of an impact was it? Are you able to measure that? I mean, you call it a sugar high, but it was a sugar high that was needed at the.
Time, right, Yeah, exactly some of this was expected and and some of it some of it was not to be expected. So how much of this was a meaningful change? So recreation services really plunged it during the during the pandemic, and little little they they returned to baseline adjusting for inflation.
Movie theater consumption is still like way way way below where it was a pre pandemic in twenty nineteen, and we sort of got back to pre pandemic levels for like a month or two during the Barbie and Oppenheimer phenomenon, but that is now just out out of the equation. That really shows us that, like it was just a special thing about those particular films. If you look at
live entertainment excluding sports, that's the Taylor Swift phenomenon. You know, like we never really got above the pre pandemic norms. So you know, like a tailor and Beyonce helped us get back to what you would have expected in twenty nineteen, but we never really got beyond there. Adjusting for inflation, right, of course, there were people were paying these extraordinary prices to go to these events, and so that is a little bit of what you see in the headline figures.
And then the last thing that I like to underscore here is there is only one area that has seen a meaningful kind of structural change in the past two years, and that is live sports. For whatever reason, even adjusting for inflation, we Americans are just like way more into live sports right now than we were before the pandemic. And like the example that I tend to go to is just baseball. Baseball has made some really meaningful changes to speed up the game and things like that and
bring people back into those stadiums. So like that's an example of you know, accessful strategy. I think in college sports, specifically college football, they also did some strategic things like you know, introducing more alcohol into the stadiums, and that
has and that has really really helped. But yeah, I want to come back to what I said before, like spectator sports aside, we've normalized and we're back to where we were before the pandemic, and there just isn't a lot of impulse left in that recreation services.
And we are talking with Bloomberg opinion columnist Jonathan Levin about how Taylor Swift helped give the US economy a second win when it was needed. But you also say in your column, John, now spending on recreation services is ebbing and new and central bankers should be thrilled.
Why right, Well, so the idea is that fed charge Rome pal has been very focused on the service sector as a goal that he saw as necessary to tame inflation the way he saw it. You know, like to a certain extent. Central banks can't really control goods prices, a lot of them are imported, and there's only so
much that a central bank can do. But services prices in particular are set domestically, they're heavily sensitive to wages and so forth, and so there was a belief that if you were going to put the inflation genie back in the bottle, you, as fed chair Jerome Pal needed to cool off some of this heat in the service sector. What he was looking for was a cooling in this space, not a collapse. And right now, that's what he's getting.
As services companies start to worry a little bit more about their bottom line, that they might start to lay off a few workers, and that that could become a vicious cycle in the economy. But for now, it feels like good news and it doesn't feel like like we're in that sort of vicious cycle.
And before we let you go, John, there was an argument that spending habits were changed forever because of and after the pandemic shutdown. And you make the argument that these numbers show a shift closer to the norm and that spending habits have not been changed forever. They may have been tweaked a bit, but it's not a complete and whole change.
Yeah, exactly. Yeah. There was this argument that people's attitudes towards spending had sort of changed coming out of the pandemic that you know, we'd bought all the refrigerators that we needed for the for the foreseeable future, and what we desperately needed were experiences, and it was like, no, not really, if you adjust for inflation, our habits never
really changed that much. It's just that the the the ticket price had changed so much, so the quantity is in which we're consuming these things haven't really moved versus twenty nineteen. We've normalized. We're back to what you would expect, and hopefully we stay there. I think that's what fedchair Jerome Pal hopes, and I think that's what we should expect going forward.
Jonathan Levin is a Bloomberg Opinion columnist with a focus on markets and economics. You're listening to Bloomberg Opinion. I'm Amy Morris. You should expect to be pampered when you dine at high end restaurants, but now some restaurants are taking that luxury step beyond a culinary destination or a gastronomic delight. You could actually make the world better through the intersection of science and cuisine. Let's talk about this.
Bloomberg Opinion columnist Howard Chueywan covers culture and business and joins me. Now, so how does this work? What's the concept?
This particular expansion that I'm writing about was this really spectacular restaurant in Copenhagen called Alchemists, and they already have very sort of space age food and all of that and and and uh uh and as well as a huge visual theater where you walk into the several dining rooms and the and the entire whole foresters are projected onto the walls and you have this amazing experience already. So what the chef is doing is starting a little side project which is going to explore how to make
turn seaweed into new proteins and things like that. So there's an entire participation of the client tele and like, oh, the chef is going off this new adventure and trying to create new kinds of food for the world. So uh And it's not exactly a fresh approach, because these
things have been done. One of the one of his mentors, was the Spanish chef Ferron Audria, who had very murdered what they called molecular gastronomy several years back, and they were sort of it was all very strange, strangely shaped things that were explosively delicious once you put them in your mouth, but they were all sort of scientifically crafted and they thought, oh, this chemistry is going to be wonderful. So all of these come together as a business, so.
They're not necessarily working to just become niche and stand out from the crowd, although that's part of it. They're actually looking to make a difference in the industry.
Yes, exactly, and that's true for Alchemists and its rival across Copenhagen is a much more famous restaurant because it's more established, named Noma. They've had this fermentation lab for several years now and they've created several products out of it, so they're expanding the range of the restaurant beyond just the food they serve during dinner time.
Owning and running a restaurant is already very expensive, it's very exhausting. A lot of places don't make it. But you add a laboratory layer to that approach and it seems near impossible. Are they setting themselves up for a challenge that might be hard to match.
What's interesting is that there are investors who are interested in this. Alchemist has a couple of very well to do Danish investors. Noma has a very very quiet but very activist sort of you know investor that helps along with all their projects. So people see this as investment opportunities, as a way of sort of expanding the range of restaurants and perhaps making a difference as well.
So where do you see this trend going or is it even fair to call it a trend?
It's it's it's been a sort of trend for several years now. I think, you know, the higher end restaurants with lots of investors who want to see this, to see that there's this interesting concept that a restaurant starts with whether or not it can be expanded and what are another commercial possibilities for what they're doing. I think because there there are there's prestige and a name attached to it, there is so much potential for more business
in the future. So I think people are watching, especially the high end restaurants who don't want to go and sort of franchise themselves in Vegas or something like that, but instead to go and do something different that will that will actually make a real statement about how they see the world and maybe even you know, make some money.
Bloomberg opinion columnist Howard chue Wan, and that does it for this week's Bloomberg Opinion. We're produced by Eric Mullow, and you can find all of these columns on the Bloomberg Terminal. We're also available as a podcast on Apple, Spotify or your favorite podcast platform. Stay with us. Today's top stories and global business headlines are just ahead. I'm Amy Morris, and this is Bloomberg