Bloomberg Audio Studios, podcasts, radio news. He is magnificent. The essay at High Frequency Economics is a yield based analysis of the economy. It is what Karl Weinberg did at Lehman Brothers for decades, and it was just thrilled that he could join us here this morning.
Karl.
I love your research note and that you say the labor market's going to hover, but GDP may be light link the two together into the first part of twenty twenty six.
Hi Tom, good morning, Thanks for having me back on the show. It's been a while. You know, we're at full employment. That's my assessment anyhow, others might not agree with that. But even at a four and a half percent unemployment rate, which I think, by the way, is going to go down in this morning's report, and we'll get a revision downward to the figure that we saw for in November. But when we're at full employment like this,
all right, the economy has trouble growing. The only way it can grow is either by immigration or getting more people in the labor force, or by increasing productivity. So productivity was really strong in the third quarter. The economy grew well, but there's no promise that those productivity gains are going to continue into the fourth quarter. So GDP growth may be capped, if you will, by the economy being at full employment right now.
I really I'm more focused, folks on the SAGGI GDP outlook of selected economists. Mister Myron want six rate cuts one and a half percent? Down? Down down? Is that a Carl Weinberg theme.
Absolutely not. I think Myron is wrong. I think he's abusing and misinterpreting the Tailor rule and the estimates and the importance of our star within the Taylor rule. Our star certainly has come down, but potential GDP has also come down, potential GDP growth. So when you put the two together, there's no recommendation from the Tailor rule or anything that I know about economics for the Fed to continue to cut rate with the economy at full employment.
This is Kurt Weinberg and Michael Faroli at JP Morgan this phrase potential GDP. None of these people within the Trump administration talk about. It's like they're blank to it.
Carl. The focus obviously today will be on the labor market. But the other side of the Fed mandate is inflation. What's your inflation view, are you concerned that we may see stick your inflation that maybe the market's discounting.
I'm concerned about more inflation as twenty twenty six progresses, because if the economy continues to grow but it can't find the workers to make it grow, then we'll have too much income chasing too few goods, and that will put upward pressure on prices once again. To me, that's what the FED should be thinking about. To my clients, that's not what the FED is thinking about. But in my view, that's what the FED should be thinking about.
So given that backdrop, how do you expect the FED to behave this year? Is it one cut too cuts? Do they need to be more aggressive or less aggressive?
I don't know. I mean, that's really a big question we have. First of all, we have four new voters on the FOMC. We've lost both of the voters who dissented from previous rate cuts, and at least two of the new people coming on board may be more inclined to ease rather than to hold steady. Even as soon as the next meeting against that, FED Chair Powell still commands probably three votes on the FOMC out of the twelve. And that's the swing, if you will, between those who
will ease and those who will settle. So I don't really know where they're going to go on this, but what I'm hoping to see as we move through the year is a change in the perception that payrolls are slowing because the economy is weak. That's where the FED is right now to payrolls are slowing because the labor market is tight and there just aren't enough workers to hire to keep payrolls growing quickly.
Some time left here, and I want to get you on much more in twenty twenty six. You should see where he lives. I mean I took the Nash Rambler once. Yeah, I had to put you know, the chains on it in I'll enter to get up. Okay, it's up the toconomy. You know it's it's like God's country. Yes, sure it's beautiful, Carl in your note, And I got any ways to go your Carl, but I got to go to your
legendary reputation on the Pacific rim and on crisis. Do you are your radar up in twenty twenty six for China or other currency or debt upsets.
I'm upset for I'm on the alert for a lot of things coming from China this year that we've never seen before. Right, if you read the IEA's Critical Critical Critical Minerals Outlook, I believe is the proper name of it. Okay, China sits at the root of every supply chain for every critical material for every Western economy, no exceptions to that. So all right, this is a weapon that G tested with rare earths last year that he's testing right now
again with Japan. And G has things that he wants and I think he's going to asking for them with Lee Bridge. I think that's the risk for China in the new year.
Carl, not enough time, Thank you so much, Carl Weinberger. With this high Frequency Economics, just definitive research report,