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We'll welcome our TV and radio audience worldwide. I'm Matt Miller, alongside Katie Greifeld and Michael McKee, Bloomberg's international economics and policy correspondent.
He is joining us now because we have.
An exclusive interview with the Richmond Fed President, Tom Bark and Tom, great to have you on the program.
Thank you so much for joining us.
I have to start with the biggest question, which is in terms of the data. We've heard from Bostic and Cashkari that this data from Trump's trade war hasn't really told us all that we need to know quite yet, and maybe it won't until September.
What are you seeing in your district?
Well, I'll agree with you that the published data shows an economy very much on the same trajectory that we've been on for the last year or two. Low unemployment, inflation settling toward target. There's a lot of questions about what happens when these tariffs are imposed, but you know how it is. There's a bunch of companies that advance.
Ordered their product.
They may have warned about price increases, but they haven't yet passed on the prices. The customers may accept the price increases or they may not, so we'll just have to see how it plays out. I've been describing this when I'm talking to businesses, which you know I do every day. I've been describing this as driving through fog. It's just very hard to drive when it's really foggy, and businesses are afraid to accelerate because they don't know
what's around the next curve. And they're also afraid to put on the gas because you don't want someone crashing into you, and so by and large, they're pulling over and putting on the hazards.
Well to that point that you're constantly speaking to businesses, is anyone making big investments at this point or hiring decisions? From your conversations, do you get the sense that firms are closed to announcing layoffs.
On the hiring side, you're definitely not saying that. Lots of hiring freezes, of lots of deferred hiring, and you see that in the data as well. In terms of investment decisions, investment moves that were already underway seem to be continuing. I've heard very few cancelations, but some of the big things that you might expect to happen when the terms of trade change. I think people are still waiting to get whatever they think is final in terms
of layoffs. You clearly hear and see about it in the government sector and in those sectors related to government spending. But outside of that, I just think people have the hazards.
On how long are companies telling you they can hold out before they have to make some sort of decision as to whether to go ahead and invest or to cancel plans.
Well, I think people are pretty patient on the investment. A lot of these are growth investments, and they're waiting to see what the terms are. If you're thinking of building a new facility somewhere, you kind of want to know what the rules are before you before you build. So I think there's a lot going in there. I also don't think there's much case for canceling. Nothing's really
changed in the economic environment. You just have policy uncertainty, and I think people are just going to wait policy uncertainty out. They do think there's a light at the end of the tunnel that there will be some certainty, whether it's the tax bill or some of the trade terms.
But I think they're just waiting it out. Hey, Tom, I was on Saturday.
I went down to Fredericksburg to purchase a used motorcycle, and I drove it all the way back here to New York through much of your district, I imagine through Washington, d C.
Of course, and I was thinking.
About DOGE, the Department of Government Efficiency, the cuts that DOGE made. Have they had any specific impact on the companies, on the constituents in your district.
Well, first of all, congratulations on making it through the Fredericksburg to DC ninety five district. That's a place that I travel a lot, and it's not very easy to travel it. There's no question that what we're seeing happen in terms of government spending cuts is affecting, especially the DC metro area part of my district. You see it in both announced job losses. If you look at Challenger job announcements in February and March, they were quite significant.
Particularly government. We see it in the week to week governments spending numbers in retail spending, particularly discretion of retail spending. In the DC metro area, job postings are down about a third. We're even seeing listings come up in the residential real estate area, so you're definitely seeing that impact in DC Metro.
Also, I get your opinion on what's going on with the relationship between hard and soft data. It's something that we talk about on the show quite frequently because you have the soft data suggesting that things look a lot more stagflationary than the hard data actually shows. And I'm wondering whether the sentiment data, the survey data that we receive, is still a reliable indicator of what the hard data will eventually reflect.
Well.
I separate business and consumer sentiment on that. I think business sentiment is a very good indicator of what you're
seeing and what you're here. What you're seeing in the business sentiment is the surgeon optimism that came anticipating pro business policies after the election has backed off, and you see hesitancy to invest, hesidency to hire, And that's the same thing you're seeing, you know, as you talk to businesses, and so I think that's very consistent by the way we saw the same thing in twenty nineteen, and I
think it played out in a very similar way. A consumer sentiment seen, which historically has been strongly correlated with consumer spending, has not seemed to be for the last two or three years. I think that's pretty simple. Inflation
is a big bugaboo in people's minds. As you know, everybody hates inflation, and the prospect of inflation drives sentiment down significantly, you know, And today's always on media environment where people look at notifications all day long that notifications they are seeing are tariff's tariffs, inflation, and they're anticipating that. You can see that in terms of the consumer sentiments expected inflation five or ten year, one year, five year,
ten or whatever, and that takes sentiment down. There's no evidence yet that that inflation driven drop in sentiment drops spending, and nothing I'm seeing in the real time spending data suggests that spending is dropping. But that's why I say there's the disconnect on the consumer side. Sentiment seems very very clearly moving things on the business side, less clear on the consumer side.
Tariff's tariffs, tariffs, as you mentioned, is what we've been talking about for some months. But now we have the budget bill on the horizon, the fiscal side of it. What are people telling you in your district and you have a lot of rural areas as well, about the potential effects on the economy from the bill. Some see stimulus from no tax on tips, no tax on overtime.
Maybe that's an inflation problem going forward, and others say maybe there's a problem with consumer spending going forward because people are losing income from Medicaid and other cuts. How do you see that affecting the economy.
Well, I was in rural Virginia, as I was telling you earlier last week, and we had a lot of conversations about how they're saying policy. I don't think this has reached the level of much focus in the small towns, at least in my district. I think people are focused on the basics the places people do. They worry about healthcare. Rural healthcare is a pretty big issue in the small towns, and people wonder about how any changes to healthcare is
going to affect rural hospitals. And I think people just waiting to see where Washington lands on this.
We had a drop in GDP that surprised me last quarter. I talked to the experts here at Bloomberg about it, and they told me that's okay. It's because we were pulling forward so much ahead of President Trump's tariffs, and now that he's pushing those tariff dates back, I wonder if you think companies and consumers are going to continue to pull forward and bring so many imports in that we get another big drop in GDP. Tom could we have a technical recession because of this?
Well, so, the businesses who are facing these tariffs go in one of two directions. There's some set of people who pull forward, and you certainly saw that in pharmaceuticals in the first quarter. Stockpile inventory is in advance of tariffs. But there's another set that are actually pulling back and saying and we saw that in China. If you look at the shipments out of China, out of the ports, and they're saying, look, I'm not taking this till I
see where it goes. Now we've got a different tarif regime in China for some period of time, we're not yet seeing much movement in terms of shipments out of China. I think takes a few weeks to get that going. And I just think we're going to see some back and forth on this this quarter next quarter, and we just have to get off to get the other side
of it again. It's part of why I say there's so much fog here because you might say we had a great consumer spending month in March because auto sales boomed, or you might say that people bought their cars before they saw price increases.
Well, as we wrap this up, when you look forward, which part of the mandate do you think we'll see an effect first on the inflation side or the employment side.
I'm more balanced than a lot of what you read. I could describe you how some of these forces like tariffs might be inflationary. I can describe to you how other forces like lower gas prices might be disinflationary.
I can describe you how.
Less government spending might be less employment, and that has issues on the employment side. I can also describe you how people who haven't hired for eighteen months, if spending continues, might need to start hiring. And so I'm waiting to see what happens, all right.
A great conversation to start this week. Are big thanks to Richmond FED President Tom Barkin and Bloomberg's Michael McKee.