Hello, Odlots listeners producer Carmen here. This episode was recorded on October twelfth at the screen Time Conference in California, and before that UAW reached a tentative agreement with Ford to end their strike. Thanks for listening.
Hello, and welcome to another episode of the Odd Lots Podcast.
I'm Joe Wisenthal and I'm Tracy Alloway.
You are going to be listening to a special episode of the Odd Lots Podcast that we recorded live at the Bloomberg screen Time Conference in Los Angeles in early October.
That's right, Oddlots Takes Hollywood. We are speaking to one of our favorites, Omeor Shereef of Inflation Insights, and we are talking to him about the macro impact of some of the recent strikes we've seen this summer from the Screenwriters Guild, from the Actors Guild, as well as the United Autoworkers. Take a listen.
Omaya is one of our favorite economists that we speak to regularly on our podcast, where we typically cover like markets, finance, and economic stuff.
That's right, and.
Today we're going to try to join the two worlds of entertainment and Hollywood with more of the macroeconomic stuff that we do on a day to day basis.
Right, So obviously one of the big macro stories here is the ongoing strikes. We got the news last night the actors are continuing the strikes despite the fact that you know, maybe it was expected to wrap up sooner. There's also more strike activity nationally. We also found out yesterday Forward expanding its strikes. So we're going to try
to balance out the two stories. Talk about what we've learned so far from the economic impact here locally in LA and southern California, and what that might say for the rest of the country.
Yeah, let's do it.
Right, Omere, thank you so much for coming here and making the time and chatting with us.
Yeah. Nice to be back again. So let's just.
Start with like a basic question, which is, you know, the two strikes one just wrapped up.
Is it going up yet in economic data?
Yeah, so, I mean, we have some national reports we can look at that show some of the impact of at least the writer's strike. There's some data out there right now in terms of work stoppages. So any strike that's more than a thousand people gets recorded by the government, and some of that data started to show that about eleven thousan five hundred writers were on strike beginning in
the June number. So we have seen it over the months, and we've now started to see that impact in the same Work Stoppages report, for example, showing one hundred and sixty thousand actors on strike as well, and of course it records a whole lot of other strikes as well, so that's probably the main place where we see it. We haven't really seen it quite as much in terms of unemployment just yet, and there's a few reasons for that. I mean, you can imagine, especially with the actors strike.
You know, actors also tend to work other jobs, right, There's very few full time actors, and so if they're working other jobs and they're making money, they won't be counted as unemployed. And in fact, in one of the surveys, the Household Survey, depending on how you answer the question of out you know, whether you have a job, where
you at your job, are you available to work? There's sort of a list of questions you have to answer and in order to be counted as unemployed, you sort of have to hit all three of these questions perfectly. So unless people answer it in a certain manner, they will not be counted as being unemployed. The one area also within the household survey where you do see the impact is, you know, the number of people who have a job but who are not.
At work due to a labor dispute.
So that is a very very specific category that they do capture in the BLS, and that is starting to show some of the impact right now. But you know, more broadly, we haven't really seen a big increase, for example, in jobless claims. We haven't seen a huge move higher in the unemployment rate data itself, whether that's nationally or even really within LA or California.
Wait, can I ask a very basic question, Maybe it's a stupid question, but what does the literature tell us about whether strike action is inflationary or deflationary? Because I could see you you could possibly argue it both ways. So if it impacts output, then maybe prices go up because supply of a given thing is in shortage. And of course if it's successful, then presumably wages for some workers go up. But on the other hand, if things aren't getting done, if things aren't getting made, then you
would assume that's a hit to economic activity. Maybe people aren't getting paid, so maybe it's deflationary in that way.
Yeah.
So one of the interesting things about the strike activity is it typically tends to follow inflationary periods. So it's not that you know, the strike itself isn't causing prices to move higher. It's that there may have been shocks like so for example, the well shock now the last couple of years with COVID that cause prices to shoot up, workers fall behind, and then eventually that leads to more
and more strike activity. So that's the first thing I would say that it really tends to follow big price increases.
The question of whether then eventually the.
Pay raises you get afterwards, you know, typically you don't that as much in the inflation data. I think this time certainly could be different, given you know, we've got strikes on multiple fronts, and I think the auto sector is the most obvious answer. But that's partly because we're still recovering from a lot of the supply chain issues that you know, you guys have talked about on the
show many many times. So when you think about autos, for example, you know, auto production is only just in the last six seven months gotten back to where it used to be before COVID. So to get a hit now to production is potentially someplace where you could see inflation pop up for new cars, for used cars, and other places, but typically you don't see as much of that happen post the resolution of the strike.
Right, Okay, well on this note, you know, I realized we are at an industry conference, so I won't ask you to opine on whether or not the writers and the actors' strikes are justified, but walk us through what the actual data tells us about wages for this particular sub sector of worker.
When I started digging into this, I was actually very surprised to find out some of these numbers. And I think in because when you know, I remember hearing about the actors strike initially, and I just remember thinking, well, you know what, I think, Tom Cruise is gonna be fine about a few months of pay, right, But what you generally don't tend to think about is all the other thousands upon thousands of actors who are not you know, the A list, celebrities who are in the magazines and
so on. And so I started to look through the wage datum, and I said, you know how much do actors actually make. So, for those of you who can see this chart, the top chart is just showing you a very specific industry, right, So this is the motion picture and video industry. This is where you'll find actors, but also everything from you know, folks who work in lighting to editing and so on.
And actors are way down there, way down that lawyers are.
They are.
Yeah, they're just below data entry and amusement park workers and so on. And they make about and you know, sixteen dollars and seventy cents, and that's the median. So half of them make more than that, half make less than that, but sixteen seventy is where they fit in. Yeah, number one, you would not be surprised, you know, you're not gonna be surprised, is lawyers.
In the motion picture industry. But actors are way down.
They're in the bottom twenty percent of all workers when it comes to wages in the motion picture and video industry. And you know, another chart I wanted to look at was to say, okay, well, if this is the median, how much do people at the bottom end make versus
the top end? And you know, the second chart down there shows you actually the green bars of the US as a whole, so all actors across the United States, and the red is specifically for the LA Long Beach Annaheim area, so that's a local look, and you can see locally, the median is actually only about fifteen dollars and seventy cents for the LA area, so below the sixteen seventy we see for the industry as a whole.
But look at how little variation there is at the bottom end, right like you, if you go towards the bottom ten percent, you're still only at about fifteen dollars and sixty cents, so only about a ten cent difference between the bottom ten percent and the middle. Even at the seventy fifth percentile, you only move up to about sixteen dollars and seventy cents, only about a buck more per hour.
Fast forwards to the ninetieth percent.
Tell now you're up into the seventies and for the US as a whole, you up to over one hundred and ten bucks. So you really you know, if you're an actor, essentially, unless you are in that top ten percent, and quite honestly probably that top one percent, your median wage is probably going to be around that fifteen to sixteen dollars range, whether that's a local number or whether it's it's national for as a whole.
One of the reasons we love talking to Omer is the level of data that he.
Becomes in clips with the numbers.
Tracy once wrote an amazing article about mayonnaise inflation and omaar like, do all the different like categories within He's like, well, you might want to look at like the fats and oils section of the Producer Price Index and then the PCE. It's you know, mayonnaise is captured here one of the things. And you mentioned it that many actors have other jobs, so even if they're striking, they're not necessarily going to
be counted as unemployed. And looking at these wages, I imagine that these other jobs that they could pick up, service industry jobs pay pretty close like they're take you a big economic hit.
Yeah, that's right.
So you know, here I wanted to take a look at some of these other areas where you would see, you know, again, as I mentioned, very few actors are full time actress, right, it's part time. You're taking other jobs, and so I took a look at sort of some
of you know, just picked out randomly. Some of the areas where you see actors tend to work, and so you'll find places like you know, occupations like you know, bartender, servers, real estate agents is a very popular one in La at least, and so here you can see this is local. These numbers are for local for LA County, and so
again the actors fifteen seventy an hour. Servers are about fifteen dollars and fifteen cents an hour roughly, bartenders you know a little bit above that, about fifteen thirty five, substitute teachers twenty three bucks an hour, real estate agents
around thirty one dollars. So you know, that's why kind of the medium is as low as it is, because some of the other occupations here are you know, whether it's bartending or working as at a resta, also tend to be on that lower end of the overall spectrum. So that's partly why you're seeing that number be so low.
But again, I think when you look at that distribution, unless you are in that top ten percent, the bottom ninety is is going to be about fifteen to sixteen bucks an hour, which tells you just yea, how tough it is to kind of make it in that industry because there is not like if you're in the middle, you're making fifteen twenty bucks more than if you were at the bottom, and it's there's basically no difference.
There's the bottom in the top, and most people are in the bottom.
Yes, that's my takeaway from your charge.
You knew I used to be a substitute teacher, right, Yes, I was aware of this. Just were you also a struggling actor?
I was actually kind of but no, just see I give a shout out to the substitut teachers as a former soaker.
Okay, fair enough.
So one thing, actually, going to Joe's point about mayonnaise and all the different data sets that you can look up, one of the things I learned about inflation statistics doing that article was that there are these qualitative adjustments that the Bureau of Labor Statistics does on these numbers where they will look at probably not mayonnaise, but they'll look at something like a refrigerator and say, well, a modern refrigerator is so much better than a fridge from nineteen
eighty five that can do so many more things, and so we have to adjust the inflation calculation. I always wondered, for something like movies or TV, can they do the same type of qualitative adjustment? How would you actually measure that?
Yeah, to the best of my knowledge, they don't do anything. Services in general tend to be very, very difficult to quality adjust you know. Some exceptions can be things like your cell phone service, where you know your wireless plan, you get a certain amount of data through it. If that data increases or decreases, they can sort of measure
what that would quote unquote cost. For movies, though I think it's it's as far as I know, they don't do anything with that, And in general, services activities are are very tough to do, so they really try to stick with with goods as you mentioned, like you know, televisions, refrigerators, cars. You know, the new model your car comes out, it's
got more bells and whistles, and the last one. They can look at how much the manufacturers spent on adding you know, better technology to that vehicle and sort of remove that from the price to say, hey, this is the quality adjustment services though it is it's very difficult to do.
Okay, So the BLS isn't watching all the new movies and going wow, these special effects are so much better.
We need to adjust our inflation methody.
No, it's a good question. I will ask them when I get back to work tomorrow.
But it's just the other thing we've learned, by the way, is that the BLSA is great. They'll just you could call them up and just ask a question about the economic data.
They'll walking through. They're happy to chat about it all the time. You mentioned.
Okay, so unemployment not really showing up in the data. Are there any other sort of like statistics in the regional economy where you can see some effect from work stoppages or certain types of sectors. I mean, I have to imagine, you know, obviously the not shooting effects more than actors effects, makeup people, affects, other production people, are other other areas or other data sets you can look at to see how the strike is having an impact or percolating up there.
Yeah.
So actually, you know, if you look at industry employment numbers, right, so specifically here for California, and you can look at, for example, sort of the film and TV industry, and you can tack on also there's another industry that captures independent writers and performers.
So if you kind of combine.
Those two big industries and say what's going on to the job growth in those two sectors in California since April, So the strike started early May, the writers strike at least since April combined, the lost about seventeen thousand jobs, and most of that has been in you know, the motion picture industry, less so on the independent writer side, but it is clear there that you're seeing some impact in terms of layoffs that are happening.
So that's one area.
But the second area also is that activity in general in the industry has been contracting probably for the last year and a half. So you know, I'm not gonna you know, you mentioned earlier about are the strikes justified or not. I don't know if I want to go down into that rabbit hole, but what I will say is that in general, I really like the way Ellen Stetsman,
who is the chief negotiator for the Writer's Guild. You know, their criticiding is the writers about striking at a time when things are tough for the streaming services and so on, and she said, look, our job is to ensure that our guild members have good jobs and share in, you know, the value that we create. As writers regardless of whatever it is that the industry is doing and what the industry has been doing in terms of film and TV is and this you mentioned shoot days earlier, so this
is a good number to look at. From twenty fifteen to twenty nineteen, before COVID hit, the average number of shoot days in California every quarter was about nine five hundred shoot days. So this is ever real quick question. Who tracks the shoot Yeah, so this is a film LA.
You can you know, google them, you can find these numbers are all available publicly, and so you if you want to get a permit to shoot a commercial, a TV show, whatever, you go through film LA so they can track who's shooting, how often, you know, how many days.
And all that.
So typically, on average in a quarter prior to COVID, it was about nine thousand, five hundred days. Obviously COVID nothing happened, it went to zero, but by the middle of twenty twenty one we were back to about ten thousand days of shooting. Since the end of twenty twenty one, so this is about the last five quarters before the strike began. Shoot days of fall in every single quarter. As of Q one of this year, shoot days were twenty percent below the five year average from twenty fifteen
to twenty nineteen. So you know, even before the actress strike started in July and the writer strikes started in May, activity had been sort of on a pretty steady down trend for almost you know, just over a year really, So there you can see that, you know, things were already kind of difficult for the industry as a whole for the strikes again, and so that's one area we can see it clearly. You can see the employment numbers
as well. But interestingly, you know, as we've talked about, because writers can work other jobs, you don't see it, for example, in the jobless claims data, you haven't seen such a big spike overall.
You don't see the unemployment rate in California moving.
So in April it was four and a half percent, now it's four point six percent. The one thing I would caution is we only have data for California through the month of August, so it's only been about a month since, you know, the actors strikes started, so it might just be a matter of time before we start to see it over the next couple of months. But on the right, on the actor's side, it might just be a little too early to really.
Say this was going to be my next question.
I'm getting the sense that there is a lag involved here, partly because people do have more than one job, or actors typically have more than one job. How do you kind of gauge how how long that lag might take until you start seeing more of a stark impact on the numbers.
So I don't know exactly what that lag would be, but I think if I wanted to try to track, you know, when is the starting to show up, I would be most closely watching the weekly data on unemployment claims, especially you know, granular or divicting down into LA what's happening in La County, partly because the workforce here in that industry is roughly I think about three and a half percent of all jobs in LA are either in
that industry or you know, in that independent performers. So those two areas you want to watch, and if you start to see it happening in LA, you know, I think it'll be obvious with the job as claims data when that starts to show up. It's tough to say, because people can transition from acting into other areas, right well, in terms of those part time jobs that we talked about.
So you mentioned earlier that you have to answer three questions in order to be counted as unemployed. Do you know what those questions are?
Out of curiosity, I knew this was going to come up. I should have memorized.
So one of them is you know, do you currently have a job? Yes, er, it would have to be no, are you available? And looking for work would also have to be now? And the third one I'm blanking on right now, but I will get back to.
You on it.
Okay, two out of three is pretty good.
I want to go back to a bigger picture thing you said, which I think is really important, which is that historically strikes are not the catalyst for the inflationary period, but come after them. And of course that makes sense. People feel that they're like falling behind. People want to like get their share, and there's this whole idea of like you know, inflation in general is often like a battle over a result of different competing claims on money.
Can you talk a little bit about the big picture, like historical trends of what we see. I know that like strike activity is picked up a little bit, but it's nothing like what it used to be. Like, talk to us a little bit more about that theory of labor tension strikes as a sort of post inflation phenomenon.
Yeah, So obviously there's been a ton of attention on unions, yeah and strikes the last year or so.
What's interesting is if you.
Actually look at the percentage of workers in the private sector who are part of a union. In twenty twelve, it was around six and a half percent. It's actually down to six percent now, which is not something you would necessarily know.
Sorry, what was the So these are people who are in a union, employees who are in a union.
In terms of all private sector employment, so out of everyone who's working in the private sector, only about six and a half percent of people were part of a union got it ten years ago, and now that that share has gone down to six percent.
So even though they're getting a lot more attention.
That that share of folks who are in the union has actually gone down. The number of people who are currently on strike is about two hundred and ten thousand roughly. That's not even as high as it was several years back. It's nowhere near the several you know, five six seven hundred thousand in the eighties. We could potentially, by the way, get there. There's you know, the possibility that these seventy five thousand healthcare workers might strike.
Obviously, the uaw IS is not completely striking.
That's one hundred and forty thousand people right now that you know, I think only about fifteen twenty thousand of them are on strike, So we could potentially get to a number that's been the highest since the early eighties. But I think part of you know, what's going on there is one I think given what's gone on through
the pandemic. Obviously there have been a lot of changes in the labor market in general, everything from work from home, but also during that period, a lot of workers, frontline workers especially, continue to work, and you know, companies did extremely well in terms of profits, and so a lot of these folks are coming back now and saying, like, you know, we ought to be sharing in some of that record profit growth that we've seen over the last
several years. And you can sort of see this in terms of opinions about unions used to be much more negative. They're enjoying, you know, some of the best support they've had in decades from the general public, if you will.
So that's that's one part of it.
Also, I think the other element here is that when you think about some of the industries where we're seeing strike activity, they are undergoing, you know, transformational changes. Right
when you think about writers and actors. Yes, of course it's about better pay and about you know, residuals, and it's also about the use of AI and people want to figure out how is that going to impact me down the road in the in the auto workers strike, yes, about better pay and pensions and benefits, also about evs, you know, how is how are the elect change electric
vehicle is going to impact workers? So a lot of these places are seeing transformational changes that are coming, and you know, workers are trying to figure out how exactly they can sort of protect themselves in that sort of environment.
So, yes, there's been a lot of activity. I think the profit story is big.
I think obviously inflation is a huge, huge part of that story. For a couple of years, real wages we're declining very, very sharply. If you actually look at autoworkers, for example, you go back to two thousand and eight, they they took a lot of cuts to help the industry survive after a wait, and if you look at their real wages since then, they're still down about ten percent.
So they're asking to sort of, you know, be made whole and then some at this point, given profits that we've seen at the autoworkers.
Yeah, they also created that sort of tiered system for auto workers. Okay, So some common themes running through the Hollywood strikes and the auto workers strikes, such as you know, obviously inflation has been picking up, real wages going down, transformational change that is this big question mark for the
respective industries as a whole. But how much of a read through can we get from the actor and writers' strikes and the economic impact so far to the UAW, because, as you point out, it feels like the situation of someone who's making cars versus someone who's writing scripts or is a part time actor.
It feels different.
Yeah, So look, I think you can't even get a read through from the writer's strike to the actor's strike, let alone to the UAW. I think what I was say in general, the underlying theme has been so far this year and parts of last year, you've seen some unions even if they didn't necessarily strike win some really big concessions, right, So think about ups and the team starves. They threatened to strike, ended up not striking, but they won some really big gains for their workers.
The pilots didn't strike, but.
United Delta ended up with forty percent races over the next four years. So you've seen these unions sort of rack up win after a win after win.
Really big unions rack up these wins.
The Writers is one element where you know, five months ago people were wondering what could they actually get out of this, and they got a fair bit of what they wanted.
Out of it.
But it's tough because now you know, as you know from yesterday, the negotiations are off right now on the actor side of things, so it's tough to get a real read through, even within the same industry. But I would say so far, I think union after unions inspiring the next union to take on the challenge because they
have racked up a lot of wins this year. UAW is also so a little bit different in the sense that the way their striking is targeted, right, So it's a very different approach than what the Writers did, a different approach and what the actors are doing as well.
So it's hard to say if we can really take what happened with the writers and the resolution on the writer's tride and say that there's something there to to learn respect to the UAW other than hey, these guys also got to win, you know, we should keep continue to kind of kind of fight.
So there's an audience question. You know, you mentioned that even prior to the strike that the number of shoot days in the area had been trending down. I think you said for five straight quarters. How is significant? Just is like the health of the entertainment industry for California.
Well, if you look at shoot days, it's not going great, right, you know, those being down twenty percent versus what we were doing in you know, five years prior to COVID is a pretty significant And by the way, that that does not include the second quarter, which is when the writer's strike began.
After that it's going to plunge. Yeah, it's gonna plunge.
And we don't even have the data yet for after the after actor strike, right, that's going to essential plumbent.
But even by the second quarter, after the writer's strike.
Began in May, so you only really had one month April where you probably were shooting, we were down about six thousy five hundred days, which is the lowest since prior to twenty fifteen. So you're, you know, you're seeing in general a year and a half of an industry that's been struggling. And I know, you know, throughout the day people have talked about streaming and how the challenge is there. So you know, I would say that the industry has been especially think about showo days also, it's
they've been losing shoe days, especially in commercials. Think about commercials for anything from like shooting you know, a car commercial or so on. They're losing business to places like Georgia. You know, Georgia's got something like about a billion dollars in tax credit that they gave out last year, and so that's you know, they're losing commercials to other parts of the country. Shows are also being shot elsewhere. So there's been a steady sort of I don't want to
say exodus, but you know folks who are erosion. Yeah, erosions a better way to put it. So you know, it's there's definitely a struggle going on right now. I think, more broadly speaking for the industry.
You know, you mentioned this idea of maybe some of the hot union summer that we've seen is being caused by people looking at the winds from other labor organizations and thinking like, well, you know, maybe now is our chance. And of course you also mentioned that a lot of strike activity tends to follow on after periods of high inflation for obvious reasons. What would be the catalyst for
some of these wage pressures to die down? I guess like if we started to see a lot of pushback, if inflation started to come down and maybe real wages stabilized, would you expect to see some of this activity go away or what does history tell us about like the end of these surges in strike activity.
Yeah, I don't know that inflation coming down would necessarily solve the problem, partly because a lot of these contracts, for example, tend to be three four years long, and so what you're negotiating for now is to try to get back what you've lost over the last three years. So inflation comes down from nine percent last year to three percent this year, that's great for hopefully locking in a win now over the next course of the next several years, But you're still trying to play catch up
to the last few years. So I don't know that that would necessarily do it. I think, you know, the two things typically tend to be one if it's if it's an industry where public opinion will turn against.
You very quickly.
So I could see a situation, for example, if the auto stuff drags on for a long time, the inevitable thing that's going to happen as car prices will skyrocket much more so than they have even in the last year or two years, and that's going to cost I would suspect, you know, that's going to cause problems and tensions with the broader public.
Right, So I think that's one potential day. This is another word.
As you said earlier, we're in an era where surveys showed that unions enjoy relatively higher so versus say several years ago, and if car prices start to spike, that could start to shift.
You know, it's all well and good when the enemy is like corporate greed, yes, right, when it starts to hit you at home, that becomes a different story. And people tend to change their tune pretty quickly. So that's one potential danger there is it's sort of the public turns against you. But the other issue also would be, you know, to some extent, there's a certain as you know, all these unions have a certain amount of money where
they help to provide for people who are striking. So the UAW for example, is giving out you know, five hundred dollars a week. At some point, you know, to the extent those funds run dry and it really starts to become very painful for the.
Workers at some point.
That's another sort of element that could you know, lead to a quicker resolution, if you will.
This seems like a distinct difference between the Hollywood strikes and the writer's strikes, where I can't imagine the auto workers are just like picking up shifts at restaurants in bars at the same wages they are the same way actors often can.
Yeah, I think it's a very different dynamic. It's so another reason it's hard to get read through between yeah them yeah, actors. Like I said, it just hasn't shown up in the claims data because they're able to shift into these other sectors.
You know, there's a question and I don't know, I wish I even knew that someone is asking other areas within entertainment that could strike. Do you know, like, are the other other risks of further contagion, Like I'm not I wish I had a better understanding of whether they're like other union guild contracts up, but is there still risk of contagion within the local economy.
So prior to all of this, there was a it's a resolve because I never went on strike, but there was a director's guild right issue, but that was resolved.
The one that I have read about more recently is voice actors.
Oh so voice actors, I mean they are are a part of zag aster, so they they can't work, for example, on a full length you know, animation feature, but they can still work on voiceovers for commercials and things like that. But there was some talk about, you know, some others who are not covered under these contracts to potentially also strike something similar with in terms of like the video
game industry as well. So there's some elements there, you know, some spillover, but I don't think those areas.
Are quite as large.
So we're talking about with respect to the captures.
Part of.
This is slightly off topic perhaps but not really.
So.
The other event that happened last night.
Obviously, the second tier event compared to the opening evening of Bloomberg screen time was Taylor Swift and her red carpet premiere for the Eras tour. And there's been so much discussion recently about this idea that Taylor Swift is propping up the US economy, injecting billions of dollars worth of demand at a time when we might otherwise see some softening.
What do you think about the.
Swift effect THEE.
Yeah, I mean, I think it's pretty real when you look at the data. If you look, for example, where she has gone on tour at certain points, you will see a spike in hotel rates everywhere she goes. So a good example of this is a couple of months ago we saw data in she was i think in touring the Midwest and it was like June or July, and prices prior to that shot off fifty five percent for hotel rates. As soon as she left the next month they were down twenty percent.
Wow.
So you know, there's pretty clear that there's an impact happening. People are traveling from all over for the shows and Beyonce also, you know, right there's actually I think, you know, an along at Bloomberg has actually written a lot about this, and I think it's there's a lot of good interesting data she's put out about it. But yeah, I think it's it's it's very real. Even the Philadelphia Fed, I believe, at one point, said she impacted the local economy in
the Beige Book. So yeah, I think it's pretty clear that there's a tailor effect happening.
Is it at the level where you, as an inflation analyst have to pay attention to Taylor swift tour dates?
I never thought I would have to, but yes, because, like I said, this hotel raids stuff was shocking, because this is one of those things within the inflation index that is extremely volatile, so month to month it can destroy your forecast, and it destroyed mine this morning. But it can move around five percent seven percent in a month. And like I said, you know, last month it was down massively and I couldn't figure out why, and I started digging into the weeds, and next thing I know,
I see this massive decline in the Midwest. And sure enough, a few months prior to that, when she was touring around the region, you had just seen this huge search as soon as she was gone, you saw hotel rates come down, so there's some element of you know, her impact on different data sets includes being the inflation index
for hotel rates that I think is pretty obvious. And again, I never thought I would have to worry about this kind of stuff, but it's it's in the data, so you know, you've got to kind of be aware of it well.
As you mentioned, so we are what is today October twelfth, I think that's regardless. It's a is CPI Day, which is like a holiday for you, and so we really appreciate you spending your CPI Day with us talking about the entertainment industry. But since we have you on CPI Day and the numbers came in a little bit hot, but like, what's you at least on the headline? Others were saying, Oh, if you look at the course services X housing is actually kind of cool.
What should we.
Take from the inflation trajectory right now?
We've had the summer of disinflation, right we had four or five months where the numbers were retreating and they would look like they used to look prior to COVID, and things were improving to the point where fed officials were saying, hey, maybe we don't need to raise rates as much anymore. The last two months we've had this a little bit of a pop here to slightly higher numbers.
You know, we're not going back to those twenty twenty one type days, or to early twenty twenty two when every month we were getting numbers that we're running, you know, six to seven percent annualized, But right now we're around three and a half percent anualized, which is still too high for the Fed. Problem is, over the next quarter, three and a half is about where we're going to be sitting, I think. And so you know, the problem is going to be that you're hoping to get down
to two percent on inflation. What looked like a trajectory that was going to get you there over the summer has now shifted higher. And I think we also have to be a little bit careful here because CPI is absolutely gonna shift higher over the next month or two. The core PCEE deflator is obviously what the FED prefers to watch. That looks like it will shift a little bit higher, but probably not as much as what's going
to happen in the CPI. For some you know reasons in terms of how they're constructed differently, So we're gonna have to watch that one more closely. But the problem for the FED, I think is when they meet in December. They're going to walk into that meeting a lot of people think we'd need to raise rates anymore they've were done. What they're going to confront is a August, September, very likely October and November CPI that are all running at
about a three and a half percent annualized rate. And you know, you mentioned the super core, which is core services outside of housing, So these are you know a lot of different things. Hotel rates, airfares, what you pay to go to the movies, you know, what you might pay to go to a sporting event.
Those sorts of prices were up.
Today at a seven percent annualized rate. And the concern I think is in December it is going to be suddenly this path is shifted higher. So do they think that they need to do one you know, maybe do one more rate hike, which, by the way, twelve out of nineteen of them thought was the right move in September. It's going to be tough for them to I think, you know, if you're a data dependent and the data shifted higher, it's going to be tough to sort of
forego another hike in December. So I think that's that's the concern for me, is you know, are they going to be able to sort of parse through this and say, hey, we should go one more time, or are they going to look at it and say, we know some of these things will cool off next year, so we can kind of hold our fire right now.
Maybe they need to ask Taylor Swift if she's going to extend her tour or not.
See, I always thought Taylor Swift tour would be deflationary because it's all these sort of like you know, people with like you know, middle class families transferring money to someone who has more money than God, who is not going.
To spend it's not spending it.
All transfer of money to someone with a much lower marginal propensity to consume. But uh again everyone but apparently in.
The short spending it on airfares into the show, to the cab and right now.
Everything except the ticket purchase, I guess would be in Yeah.
And I was say one of the things about the strike too, By the way, there's going to be a lot of numbers that come out. You know, a recent one from the Milk Institute said the economy is going to take a five billion dollar hit from the actors and the writer's strike. They also said there was a two billion dollars hit in oh seven oh eight. The thing, though, is for a lot of people, it's like, let's say the movies don't come out, new shows are not coming out.
If you're somebody, you know, you live in wherever in la and Manhattan, Brooklyn, and you go to the movies often, and these movies are delayed. Now, that money can get spent elsewhere, right, Like we know that from COVID. Right when people couldn't people were stuck at home, they couldn't go out to the restaurants and the bars.
What do they do.
They just bought every sofa and you know lamp they could buy, and they remodeled.
Yeah, and they continue to do that for like two years.
So it's not you know, if you're living in New York and you can't go see a movie because there the movie is out, you know, you go check out a new band at the Mercury Lounge. There's a lot of other things to do, so that money can get spent elsewhere and kind of limit the impact of the strike. And in fact, if you look at, you know, sort of some of the lost wages we've seen so far for actors, for writers, it's a it's a problem for
the LA region. You're talking about potentially as much as a two percent hit to GDP I think from for annualized for LA if this goes on for the rest of the year. But when you broaden out to California, this is a three and a half three point seven trillion dollar economy right now, you're talking about a couple of maybe a tenth. You go out to the US, it's a twenty four trillion, twenty five trillion dollars economy.
It's virtually close to zero. But like I said, you know you, even though they are people may not be able to spend as much on the movies and sort of associated things that spending we know can shift elsewhere and kind of limit that damage.
I feel like I need to spell out for all thoughts. Listeners that go see a new.
Band at the Mercury Lounge was in fact a reference to Joe's Band and their first show at the Mercury Lounge in December and in terms of inflation, I just want to add, Joe is making me buy my own tickets. I don't even get comped the twenty bucks for.
Those we're trying to trying to do our part for the like. If you're in New York City December nineteen, come out to see a light sweet crew at the Mercury Lounge. Oh Mercerief, thank you so much for doing this.
That was our conversation recorded live at the Bloomberg screen Time Conference in La with O Mayor Sharif. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me at the Stalwart, follow Omayor at Fcast of the Month. Follow our producers Carmen Rodriguez at Carmen Arman and Dashel Bennett at Dashbot. And thank you to our producer Moses Ondam. From our odd Lots content, go to Bloomberg dot com slash odd Lots, where we have a blog, we have transcripts in a newsletter, and you can chat with fellow listeners twenty four to seven in our discord Discord dot gg slash odlocks.
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