Welcome to the Market Pulse Podcast. I'm your host, Jesse Hardin. I'm a member of the Equifax advisory team, and as a group, we identify economic considerations. We leverage data and analytics to translate that information into industry insights. This helps us make recommendations to support our clients during economic uncertainty and to really uncover growth opportunities in consumer and commercial credit risk spaces.
I'm pleased to welcome our usual cast of characters. I've got Dave Soka. Hey, Dave. Hey, Jesse. How are you? Hey, doing well. I've got Tom O'Neill. Good afternoon, Jesse. Hey, Tom. And last, and certainly not least we have Maria Urtubey. Hey, Maria. Hi. Good morning. Still here, ? Yeah, there you go. Yeah, I forgot about that. And then we've got a voice missing today. So Emmaline Aliff is is on vacation. We we actually do let our people go on vacation. So she's on special.
I thought. Thought it was special. Assignment. Yeah, exactly. Yeah. Hopefully it's a good place. So how's everybody doing? I know there's a lot going on right now. Like what I, I anything happening? Yeah, like, well, baseball's, baseball's going again. Oh. The important stuff, right? Yeah, absolutely. Well, yeah. Yeah. No, there could be, there could be undertones to that. Yeah. There's a little bit going on with the economy, I would say. Maybe a thing or two.
Yeah. And my football team, Liverpool is nine points away, I believe, from winning the leagues. So two or three more games, and we got it in the bag. And that's not a knock on on other football teams that people on this podcast may or may not be supporting. Yeah. That, that we'll not speak of. Yes.
Yeah. So for the listeners, we've got we've got actually four on the, on the, the team here that are that, as Dave said, football fans, I would say they're soccer fans, but either, either here nor there.
Well, good. Well, so I wanna do, you know, when we think about where we've gone with you know, with things related to the economy, what I'd like to do today is really set the stage for a discussion around how things have evolved in, you know, in the us especially with the macroeconomic picture of where we've,
where we've gone. There's certainly a lot to unpack. You know, when we think about the recent events that we've, that we've seen when we started in January, I think there's, there's a lot of momentum that we saw,
a lot of optimism building with the economy. And it's almost like then, wham, it's like this policy change and, and economic changes that really kind of, you know, changed the overall outlook maybe to some extent and to some, maybe not to others you know, but what I'd like to do today is, is, you know, kind of uncover what we've seen, do a, do a deeper dive, and we'll talk you know, we'll talk a little bit more about where we see things you know,
kind of playing out there. Before we do that though, I want to take a quick a quick break and we'll we'll let you hear from our friends at Moody's and, and going through some of the important economic and consumer metrics that that are relevant today. The global trade war has escalated sharply driving the effective tariff rate to levels not seen in over a century. Business and consumer confidence have weakened supply chains are under strain,
and global investment is stalling. The labor market remains resilient for now. March saw stronger than expected gain of 228,000 jobs, but hiring is slowing and public sector layoffs loom. Meanwhile, the unemployment rate ticked up to 4.2% as labor force participation approved inflation cooled in March with headline CPI falling 0.1%, and core easing to 2.8% year over year. But with tariffs set to push costs higher, the reprieve may prove short-lived now to monetary policy.
The Fed is holding steady for now watching for the net impact of tariffs on both prices and employment before easing. Our baseline is that the US economy avoids recession, assuming it deescalation on trade, but the risks are rising. A prolonged conflict could erode the United States safe haven status and push the economy into a downturn. Thanks, Moody's. So, it's sort of hard to escape the news cycle right now with the economy. We think about where the markets have gone.
When you see the s and p and the Nasdaq and the Dow, you know, some of those are off almost 15%. We see some of the confidence surveys whether it's the University of Michigan or it's the whether it's the conference, board surveys you know, kind of those, those stories, you know, show that we've seen decreases in in confidence and this notion of uncertainty building in the economy. And so I think the bulk of this podcast, what we want to do is we want address those changes in the, you know,
in the economic landscape. But I, I think we want to go a little deeper. We want to talk about some of the key drivers. We want to focus on what it means, but then we want to focus on the impact to consumers and businesses. And then, you know, really focus on recommendations that we can make. So, so what are the recommendations that we want, you know, we want you, the listener to understand as it relates to the portfolios that you that
you manage. So a good example would be, we want to find a practice or two that we would suggest you look at maybe to help mitigate some of the impacts that we're feeling right now in the economy. So that said, does that sound like a decent plan team? Yes, it does. Sounds like quite the undertaking. Yeah. It, it is a lot. Yeah, certainly. So, okay. Well, let's get started then.
So I think the best thing to do would be to start out and just to address how did we go from a consensus of kind of stronger economic growth to where we are right now, which is that we're probably feeling a little more headwinds, a little more economic uncertainty. Dave, can I ask you to maybe kick off on that one?
Sure. Jesse. So, so job security, spending power and inflation, what was looking rosy a month ago, maybe a couple weeks ago now, has us rethinking everything, the American consumer as well as businesses are reading the news, hearing the announcements, and are now suddenly concerned about the future. Most people and businesses prefer to live and operate with a degree of certainty in their lives, to have this much uncertainty thrust upon the economy.
Certainly muddles the waters in terms of an outlook for the rest of the year, but obviously, businesses as well as consumers have had plans and I would say monitor the plans and act accordingly for changes.
Yeah. Interesting. Dave, I, you know, I, as I was thinking about it a little bit further with what you were saying, I think it's, it's sort of ironic because when we think about the, the data that we're seeing, there's almost like this juxtaposition between hard economic data and the soft data, which is kinda like that consumer survey, that consumer sentiment data. You know, it seems like the hard data's not really indicating that there's there's as much to worry about the, the soft data.
The consumer data's maybe telling a little bit different story. So it almost seems like you know, are we you know, are, are we feeling like consumers are really going to get there in terms of you know are they really gonna act on that sentiment that they're that they're expressing?
Yeah. And, and Jesse, I see it as, as an interesting mix of that hard and soft data that you referenced, not just now, but, but really what we've been through it's easy to say for the past year, but really for, for the past five years, we, we, we can go back to the beginning of, of the pandemic and say, we've, we've been seeing this uncertain mix of hard and soft data for,
for that length of time. And, and we see that manifest itself in, in, you know, the consumer sentiment that you were talking about, you know, if people feel okay and, and, but not great. And, and how is that impacted by headlines? You know, we see things like inflation is, it's under control, but it's not quite dead yet. And we, we have all of these areas that, that are sort of gray. But, but the nice thing is data is still our friend, friend.
Through all of this, we can still look at what's actually transpired.
And while no one, none of us at least have, have that crystal ball to say, here's what's going to happen in the months ahead, we can be pretty intelligent about seeing what the ramifications of all the things that we have been through over the last five years and see what the impact is on not, not just consumers in mass, but different populations, different cohorts and, and different segments of the society as well as, you know, different, you know, small business and commercial enterprises.
Yeah. Tom exactly that it's been five years. So are we still feeling this uncertainty? What are the reasons behind the consumer sentiment, and why is this soft data showing four consecutive months of decline? And is it just a sentiment, as you said, consumers are reacting, they're being more cautious, they're cutting back on spending, even assessing if and when to make big purchases. Is it the right time?
All these behaviors, as you said, manifesting that sentiment, not just standalone sentiments we've been discussing internally and how it shows, for example, in the big spread of consumers reactions some needing to make the car purchase and acting quickly given the impact on car, car tariffs, others not faced with a need, postponing the big purchase, not at this moment sticking to necessities.
Yeah, and I'm, I'm raising my hand. I'm one of those that, that went out and took advantage of the, the car purchase while I could. So definitely something that, that we've seen and makes a lot of sense. So let's let's switch gears and talk about, you know, probably arguably one of the you know, one of the biggest impacts that we're fee that, that we're seeing right now,
and that's tariffs. So I'm gonna start, Tom with you then, if I could maybe talk a little bit more about the importance of tariffs and the potential impact that we see both to American consumers and business owners. Yeah. So, so the, the basic answer to that, what is a tariff? Tariffs are a charge on, on imports or exports depending upon the country, you know, levying the tariffs. They are an additional fee.
And, and, and that, that fee is placed on the, the ability to bring in goods and services from other places. And the impact to the consumers and to businesses here in the United States really depends on the size of, of those tariffs and what those tariffs are and, and what they're on. You know, it could be on, on a particular item that's of essential need and that there's no real
substitute for. So it's not something that, that the consumer can easily switch to buying something different or buying a domestic version of that. And in those cases, that, that, that additional cost is going to be felt very directly on the consumer or the business making those purchases. Or it could be something where there is a lot of flexibility. You know, maybe there is the, an alternative to drive towards a domestic version of it,
you know, that's not incurring that price. So it, it's, it, it is one of those, it depends types answers. But, but essentially it is an increase in the cost of those, those different items. And as we've been seeing the impact of, of what that is isn't gonna be felt until we actually see
what, what actually plays out. You know, what are those going to be? What, what is the, what is the sustainability of those, those tariffs, you know, is it something that that there's going to be reciprocation on?
Is there going to be resolution on those? So, so ultimately the impact, what, what, what flows into the hard data that we're going to be seeing, you know, will take some time to, to manifest itself, but as, as I was mentioning before, we can at least look at some parallels, for instance, like some of the inflationary periods that we went through and say, okay, if some of these things come to pass, if we see, you know, increases in affordability issues, what has been the impact?
What sense can we make from that? What, what strategies can we take to account for that? Yeah, Tom, I use kind of one of the, the words that I love to use with my kids. And it goes back to the, it's not a one size fits all stories. It, it truly depends, and I'm gonna kind of highlight business as well as consumers. And so for businesses kind of relying on overseas suppliers, the impact potentially is really huge.
Think finished product manufacturers or even your local restaurant who sources product and supplies from other countries shifting to families. It could mean fewer tree toys under the Christmas tree this year, the cost of toys imported from China will be at least 50% higher given the current levels. So that added cost to a household budget could result in half as many toys under
the tree this year. It all boils down to the consumer, the business, and where they make purchases from and where those products originate from. Yeah, that's, that's interesting, Dave. I, I know when I'm talking to customers, I get a lot of questions about like, how do I measure the impact of tariffs? And I was thinking about a study that Yale brought up. It was a,
a study from the Yale Budget Lab. And there was a, an impact graph that was, that was really telling to me, and it looked at the impact of overall disposable income. And Tom, I think when you talked about the definition of tariff, I think we know that tariffs can tend to be a regressive tax on on consumers, right? You know, the, the idea that it's that we will see more of an impact on disposable income from lower income households. And that's that's always a worry.
I think we've heard economists we work with, with Moody's a lot, and one of the things that we've heard is there's a rough estimate that you can use, which is for every sustained percentage point increase in the tariff rate, we would potentially see that inflation could be impacted by 10 basis points. And GDP by seven basis points to the negative. That's,
that's kind of a lot of math. The way I boil it down is really the impact to, you know, to us as Americans is that, you know, things can be more expensive and, and really, it, it, you know, it may, it may you know, drive the, the overall outcome that consumers like, like all of us you know, have.
And so I think that's you know, certainly when we think about the overall impact, that's one that I, that I watch just because it's it's, you know, one, it's kind of fun to see the math, but then it's really interesting, I think to, to, you know, truly gauge where, where things might be going. And, and this translates, as you were saying, just into the decrease in spending right. How is real income trending over time?
Even personal savings we're up to the low four percent this year after reaching 3.3 percent low in December, but still away from the historic average of seven point 0.5 let alone of course, the 30 percent savings rate during covid times with stimulus money. So those savings are now diminished or gone. Consumers have to now assess exactly what their disposable income is and what
their savings are. And you might ask yourself, how can I now limit my purchases to essential, so even switch brands that are more aligned with my cuts in spending based on the reality that I have ahead. And in the case of our customers, for example, the lenders, they're still facing these same challenges since their customers are these
consumers. They might want to grow with new customers, they might want to better manage their current customers, and they're trying to mitigate risk balancing growth objectives. But all of these are the same consumers with declining consumer sentiment that are pushing back. Yeah, great point. Maria. I was even, you know, I was even thinking about an example, I, I , I was talking to a friend of mine that has a, a business here locally.
It's a tile and flooring business. And it was interesting, we were kind of talking about tariffs, and one of the things that, that he had mentioned to me is that they, they have a small location, and they were really looking to expand this year. They had, they had put together a fund to, to try and build a new location. It was interesting that the, the outlook now for his business is such that he had to take all of that money and, and apply it towards inventory to try and, you know,
and try and beat the the tariffs so that he can stay competitive. And, you know, that's one of the things, as I think about it, obviously that's just one example. It's not you know, it's not happening across the board, but when we think of the impact, you know, for businesses, maybe they were thinking one way at the start of the year, and they really had to shift their thought process.
And that's something that I think is you know, is certainly, we may not have anticipated that at the first of the year that we would be thinking of, you know, major business shifts, but it is one that's happening. Yeah. I, I like that example you gave the, the small business example that you just gave there, Jesse, and, and turning it again, back to the, the consumer view, not all that different. You know, we know that the, the impact's going to be felt differently by by different populations.
And, and, and we've actually seen some of that. And, and this goes back to what I was saying earlier in that, you know, we could even, as we're heading in times of uncertainty and heading into more uncertainty, we could still look at the data that we do have to make some intelligent, you know, sense out of what's going on. And, and, and we've, we have, I guess, sorry to say some rich data on the impact of inflation over the last few years.
We know that the, the KS shaped economy is real. That, that there have been people since the pandemic that have been, if not, you know, just, you know, making due, but even thriving in some cases, you know, through all of these conditions. And we know that there are a large portion of the populations that are really struggling with affordability and other factors. And, and that's gonna be exasperated, you know, with this as, as tariffs do incur.
I'm not gonna go all Grinch that Dave did and, and talk about, you know, boys under the tree. But, but that is the impact. You know, family households are going to feel this differently. Some are, some are going to wave it off as a nuisance. Some are going to really struggle with their, their basic household needs. And, and we saw that with inflation, we have the, the potential of seeing, you know, this to some degree as the result of, of sustained tariffs.
Yeah, it's a, I think a great point, Tom. I mean, obviously if, if, you know, if you follow economic data, we got some of the spending spending data today it, it's, you know, consumers are already kind of indicating that they're hoarding, you know, getting, getting that you know, that last purchase end. So yeah, it's, it's interesting to see the you know, sentiment play out. So I think, you know, that certainly great points related to headwinds around you know,
around the tariffs. Let's kind of brings me to my next my next thought, which is leading indicators.
What leading indicators should we really be watching for? I know economists, you know, they look at and, and even market watchers, you know, they're looking at data, they're trying to understand what that data tells them, but but what indicators, if we think of our customers you know, should they be looking at to get a better idea for whether or not you know, the, the consumer is really starting to act on the, the sentiment that they're providing. Dave, let's go ahead and start with you.
Yeah, thanks. And some of. That thunder has been stolen already, so and I'll try to be not Grinch like for, for you, Tom. So so there's really two things. So the, you know, the health of the US economy relies on consumer spending. So the spot potential recessionary trends pay close, close attention to consumer behavior.
Are people rushing to buy those big ticket items like cars and appliances ahead of tariff increases, surprised they have been are they using their tax refunds to pay down debt, or will they still be spending freely to facilitate those pull those big purchases being pulled forward? Changes in these spending patterns can signal a, a shift in consumer confidence. On the other side, additionally, job numbers are a crucial indicator.
Our recent C-N-B-C-C-E-O poll showed a percentage of CEOs anticipating or considering job reductions this year, we need to monitor employment closely as another potential sign of an economic downturn. Yeah. So, yeah, definitely. I, I think very, very insightful points, Dave, when we think of the economy and, and you know, jobs certainly we've seen consistency in the unemployment rate.
But yeah, I, I think to to, you know, to some of the conversations that we've heard around, you know, the employment rate, how, how quickly it went up towards the, the fourth quarter, and so yeah, that great great insight there. One other thing that I would add to that you guys are providing some, some great indicators from sort of that macroeconomic perspective.
And I'm gonna, I'm going to go to my tried and true role and, and turn it back to the consumer again and, and say, one of the things, especially for our clients to be looking at at this point, are those delinquency rates as, as boring as those, those are as traditional as those are, those are going to be the first signs of,
of where we're starting to see more consumer stress. And, and, and that's particularly relevant given not just tariffs and, and the things that we've been talking about here, but everything that's going on, you and, and we're even to the point of, you know the resumption of student loan delinquencies and the impacts of those. So from a consumer standpoint, from a lending standpoint, it's always important to, to be monitoring those risk levels and,
and any changes to what's happening off of your portfolio. But, you know, it's, it's goes without saying that's, that it's particularly important right now. And, and I was going to add in terms of indicators, Jesse, that you were asking about, we could also argue home equity has reached 35 trillion on the other hand. So this 80% increase since the beginning of 2020 is
phenomenal. But at the same time, we're hearing concerns, not just relating to the high borrowing costs, but the increase in property taxes and homeowners insurance, and these individuals are hesitating, what do I do next? How do I meet these payment obligations? We could also argue 60% over 60% of the US is a homeowner, but most carry a mortgage.
So they're likely asking all of these questions we have to keep in mind the overall associated housing costs besides, of course, the consumer spending and the necessities of households. And then we have the renters, they are part of the uneven k shape economy that Tom was discussing. And we are, they're facing even more challenges right now.
Yeah. great, great comment. Maria, I was even as I was thinking about that, I was, I was thinking about and, and I'll close this section out, but I was thinking about the, the idea of the wealth effect. So we, we think of the wealth effect, it's this notion that consumers react when there's a stronger con, you know, confidence level in their personal wealth. They may spend more, they may consume more when assets are higher than than when they're not.
And like you said, Marie, there's a lot of home equity, there's a lot of investment asset out there. And, and so when we see things like 401k statements, and I would,
I would encourage everybody, maybe don't open those right, right away. You know, but certainly, you know, when we, when we see those, those those downtrends and assets you know, it's, it's a good indication I think of where confidence level is and, and how to, you know, how do consumers react to seeing that comfort, that, that comfort, that that wealth brought you know, to have, have an impact.
And so you know, that that can also kind of lead to stress levels that, you know, that change you know, consumption and, and and economic behavior.
So, okay. That's great. So what I'll do is you know, last five minutes, I want to switch gears and really talk about those best practices, though, the things that we can we can impart on our listeners really as they observe what's happening in the economy, things that they can do to help mitigate the stress and, and really kind of get over the you know, over the, the, the hump initially of like looking at the data, but then how do we react to that? So Tom, let's start with you on that.
Sure. I'll, I'll, I'll kick that part off and, and really what I'm gonna say is, is gonna come across as a bit self-serving, you know, coming from, from Equifax, but, but really the, the way to reduce uncertainty is with information and, and applying that information on a regular, frequent basis is the best way of not only being able to understand the situation as it is,
but also to pivot as that situation changes over time. And, and, and we know that that's going to be the case, whatever that uncertainty is,
we know that the uncertainty is going to exist. And so work with the, work with the information at hand, you know, stay fluid in terms of your, your strategic development and be able to adapt and, and, and as we see that the, the customers that are dealing with, with additional stress start showing signs of that you'll be in a position to not only, you know, protect yourself, protect your portfolio, but also work with them to help them through these particular times of,
of transitory, you know, struggling. Yeah. Maria, how about you? Yeah, I will go back to what I said earlier in how to find that balance between mitigating risk and looking for those growth opportunities in these uncertain scenarios. As Tom was mentioning, you will need to fine tune or even be more intentional or targeted with new customers and existing customer management. And it is going to be harder now to identify these pockets,
even if limited. But if you want to identify these segments, you need more data and insight. You need to be more orderly in how you're using that data, how you're leveraging the trends to find those limited opportunities. So that's what you want to make sure you do. Istan was saying as frequently as possible, as fine tuned as possible, given there might be fewer, but there's still, there still are opportunities.
And of course, if you're first during uncertain times, you're ahead of the game once things start picking up again. Yeah. Thanks Maria and Tom, and I guess I, the one thing I would add, and that's based upon conversations that I've had over the last several weeks with both consumer and commercial lenders is that a lot of them are taking a wait and see approach in terms of any kind of changes to be made.
And some of you said this in our, in our market pulse survey over the last couple of months as well. Obviously business plans were made coming out of Q4 and, and heading into 2025, and things were a lot different just a few months ago. So a lot of companies are out there saying it's a little too early to decide. And that's really what I think building on both what Tom and Maria have said is that it's not time to panic. If you've got sound business practices, you're in good shape.
You've, you've got formative formalized lending as well as account management policies in place and strategies, just make sure you're staying on top of them with the right information and then taking appropriate action in a timely fashion, and that'll help mitigate any kind of uncertainty that you might experience. Yeah, I, I wholeheartedly agree, Dave. And, and, and I'd like to play off of what both Maria and Dave were,
were talking about there. Dave mentioned having, you know, the sound strategies that, that that that lenders have put into place at the end of 2024 to see how they're, they're going to approach 2025 and how a lot of them are in a wait and see, you know, mode to see what kind of events play out and what the data does start
saying. And of course, that's going to be a a, an interesting thing to finish to figure out as well is like, how long do we stay in that, wait wait and see, because ultimately the move the world is continuing to move forward. So at some point we need to act, but I'd like to to sort of emphasize some of the point, you know, one of the points that Maria was making, that having the ability to be flexible and not necessarily sort of just work in a reactive mode could very well work in your
favor. A lot of lenders potentially could be clamping down. Yeah. And we see that in times of uncertainty. We see the, the natural inclination to sort of pull back. And we also see that in those periods there are frequently opportunities for growth opportunities to take advantage where others are pulling back to go in and fill the need that is exposed.
So this is what we're talking about in terms of being able to not just look at that data and, and look at it frequently, but also to be able to adapt and move fluidly as a result of looking at that data and, and not just mitigate risk, but also to take advantage of opportunities. Yeah, and I think I'll, I'll close this out really playing off on, on almost everything that you guys said, which is don't forget your experiences.
We've think, you know, we think about the, the last five years or so in the economy that we faced in the pandemic and leading, you know, to after the pandemic, we had higher inflation, we had more stress, there was inventory shocks. Certainly the drivers may be different now than, than than then. But what I, what I think is, you know, a good thing to remember is that we have good data.
We can see what those behaviors were a couple of years ago, and that data is, you know, is the experience that we have that we can play off of and, and really look at what it told you. So I'm sure all of our customers did postmortems on what that, what that data looked like, doing analysis to see what the reaction of consumers at that time was. And so build that baseline and really use that, that information that you had and, and think about how maybe we see similarities to where we are now and
differences, and then react to that data. I think that's you know, that's kind of a culmination of, of all of what we said in terms of how to react. So I think then what we'll do is we'll call that a podcast. I want to certainly thank my panel. It was a, a great panel today. A lot of information we covered. What I would say is if you have any questions or suggestions for future podcasts, you can reach us at risk advisors@equifax.com and we all look forward to hearing from you and be well.