The Outlook for the U.S. Economy
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On this podcast, we take you inside those conversations, the stories, the ideas and the stocks to watch so you can invest smarter. Now, let's dial in. Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. My name is Megan Lenhardt. I'm the senior economics reporter at Barron's. And thanks for joining us today to learn more about markets and stocks in the news.

My guest today, I'm very excited to announce, is Beth Ann Bovino, Chief Economist at U.S. Bank, where she oversees economic scenario analysis among her many other responsibilities. With a deep background in macroeconomics and financial analysis, Beth Ann was previously S&P Global Ratings Chief North American Economist, managing the forecasting operations, again, of the U.S. Bank.

among her many other responsibilities. So we're very excited to have her and we're going to be talking a ton about the U.S. economy and what is going on. So welcome and thanks for joining the call. It's great to be here. Thanks so much, Bethann. So let's start with a little bit of a level set. We just got done with the first quarter. And what was your take on the economy at this point?

from where we were in the first quarter? Correct. Well, what, you know, there are a lot of things, you know, lots of jumps,

you know, back and forth. But at the beginning of the year, we were expecting the U.S. economy to slow. We were expecting that, but it was going to be a soft landing. We knew that, you know, we already had the post-election clean sweep of the Republican lawmakers. So we were factoring in that most of those promises would be policy. And we saw that those new initiatives would kind of have a competing impact on growth

but ultimately more inflation for the Fed to fight. So what we saw was that the looser regulation and tax policy, which we saw were going to support growth, would be offset by the economic drag from tariffs and tighter immigration. But we thought it was an offset, and we actually saw the growth holding up relatively well. We were thinking a little over 2% growth readings. That's a nice reading for the U.S. as it moves into a soft landing.

And the unemployment rate we thought was going to be kind of where it is right now for both this year and the next at around 4.2%. We thought consumers were going to be spending still pretty healthily this year. And we did recognize, though, that those policies that were like those policy promises that the new administration were going to put in place were going to be a bit inflationary. So we did think that inflation was going to pick up a bit this year. That's

That said, you know, I mean, January came in with some pretty bad economic readings and that's certainly spooked markets. But we saw that we really saw that as, you know, we saw that was more tied to frigid weather. I mean, gosh, it snowed in Texas, I believe. And, you know, kind of a post-holiday lull in terms of spending. It wasn't really tied to the economy. And that kind of showed up in February data.

The retail sales data in February held up pretty nicely. And yeah, you know, the overall reading wasn't really as strong as what market expected. But I, you know, tell people who are listening that one thing that we watch is the retail sales control group, which excludes autos, gasoline, building materials and restaurants.

That has a really close relationship to the consumer spending component of GDP. Well, that number came in over twice expectations. And we saw that as a real good sign that the economy was holding up. You know, we knew that there was bumps in the road, but we were still pretty confident back then. Yeah, it sounds like, you know, it was a fairly solid start to the year, if you will.

That's what we were thinking. In fact, our title for that report was To a Prosperous New Year. Right. Now, obviously, the situation's changed a little bit over the last couple of weeks. I feel like the elephant in the room, of course, is tariffs. And I'm curious,

With what you know now compared to what we knew two weeks ago, compared with what we knew a month ago, how do you foresee the current level of tariffs really impacting the U.S. economy? Maybe we'll break this up and start with inflation. You mentioned that you did expect things to be a bit more inflationary this year. But do you feel like at this point this is gearing up to be a one time price level adjustment that's short term, sort of like how we think of an oil price shock?

Well, you usually would think that for tariffs. Usually tariffs are put into place, prices go up, and then when they end, prices go down. However, this time might be a little different. We'd also have to factor in the retaliation from other countries as well, and so that pushes the price impact up higher in other countries, and that could feed into the U.S. economy as well. Now, usually that's the case theoretically, but...

A couple things to take into account. One, you have businesses who raise their prices, a little harder for them to want to pull it back.

So there would be a kind of a push-pull in terms of businesses really reluctantly letting go of some of those tariff push, the pricing push from tariffs, even when the tariffs go away, a little less likely to get rid of, bring the prices back to normal. That's one thing. But then the other thing to take into account is how the economy responds and particularly how households respond to

Households already have responded pretty negatively to the tariff reading, and you've seen inflation expectations really climb higher. If those inflation expectations become, as the Fed likes to say, persistent,

then it becomes a much bigger challenge to turn that around. So those so-called transitory readings for tariffs no longer may be the case. And that can keep those pricing pressures up higher for longer.

Ah, you mentioned the dreaded T word, transitory. I am sort of curious because you mentioned, you know, inflation expectations becoming potentially unmoored. And it feels like this is something that's happening in real time in the markets. Obviously, we've had a ton of market turmoil. And I'm curious how you think, will that, does that spill in over to the real economy? I would say, yeah.

Well, I tell you, this week is going to be a very interesting week to pay attention to because one of the things that we're looking for is earnings calls.

What are executives saying in terms of how this incredibly tumultuous period is playing into their decisions in terms of expansion, investment, hiring, for example, or keeping the workers they have in place? So this is something that we're watching very closely. I would say right now,

Right now, when we think, I can also tell you another thing to keep an eye on. I told you about our title, To a Prosperous New Year. Well, now the titles are looking a lot more gloomy. I know one team, not ours, said it, we called it There Will Be Blood. Or we're thinking like, gosh, is it the year of living dangerously? After the April 2nd tariffs, kind of all things are on the table these days.

We, I think one thing to keep in mind, and I know that the back and forth, you know, when we look at what's happening with markets today, I don't know what markets are doing right now, but the back and forth is a lot of it's driven to these announcements that are in play. And when we look at what was announced, I guess, last week, you

You know, that the pullback of the universal tariff to from 20 percent to 10 percent. But with that huge jump in the tariff to China, 100 is significantly high. That pushes the so-called effective tariff rate now to its highest level since the year 1900.

And that, to me, is incredibly scary and certainly plays into not just the inflation call, but what businesses are expecting. It doesn't just have to be big, big businesses. We're talking mom and pop shops as well. And this is certainly a threatening time.

Well, yeah. I mean, you know, small businesses are a major employer in the U.S. economy. So, you know, it might be coming in drips and drabs, but that can be particularly problematic if you do start to see a slide there. Absolutely. And that's one thing, you know, I mean, basically small businesses are the kind of the driver of job growth. So one of the things that we're keeping an eye on is what happens there. Now, that said, you

You know, and the data that I'm going to give you is we did an analysis on growth expectations, and this was done before April 2nd. So you'd have to say that the numbers are a little bit old. That said, one of the things that we were expecting, we still have.

kept the soft landing in play. We saw that the tit for tat, who knows if it will last, who knows if it'll be pulled back, but we did recognize the risk was certainly high. Even so, while we still had that soft landing, it was nowhere near the much more positive readings that we had in January. You know, now we had inflation up significantly higher and of course,

the growth readings nowhere near, not looking above 2% at this point in time. It was certainly getting a little closer to that 1% mark. And while that's still positive, it's still pretty scary. It is pretty scary. Makes sense. I want to go back to something that you were talking a bit about, which is that effective tariff rate. We've talked a lot about that, particularly in regards to goods prices.

But how vulnerable do you think the services sector of the U.S. economy is in all of this? It's funny. One of the things that we noticed was that under the Trump administration's tariffs that were put in place on April 2nd and then on April 10th, and I don't know how many days, there were many announcements. None of them have been really tied to services. And there's a good reason for that. The United States...

I know we all talk about the large trade deficit that the United States has, and it is incredibly large. But what doesn't really get a lot of attention is

That's all in goods. The United States has an incredibly large deficit in goods, but the United States has also a very large surplus in trade and services. In fact, I think, I know we were just a few years ago, and I believe that

it still stands that the United States has the largest surplus in trade in services. And when you think about trade and services, that would be basically folks that come from the rest of the world into the United States. It's considered an export. You know, people that come here, fly here, that's an export in services in the United States. Um,

Another service is intellectual property. That would be software that we sell abroad. It would be movies and entertainment that we sell abroad. That also is an export of U.S. services. Then you have financial services and insurance services. All those are considered services. Now, the risk that I see is

If we see a retaliatory response, right now we see it from China, but if we see it from other countries,

Will they target trade and services? And that, I see, could be the United States Achilles heel. That could make the story for 2025 and 2026, the growth story, much more severe. Gotcha. It could impact that soft landing projection at the moment. Agreed, agreed.

So you mentioned that, you know, you have a little bit of a higher forecast for inflation. It sounds like you're a little concerned about the labor market, slower growth. To me, this reads stagflation. How concerned are you that we are entering a period of significant stagflation? Well, yeah.

I, they always ask what keeps a, what keeps an economist up at night? And that's probably one of the worries that I would have. Okay. Now, let's put it in perspective though. The, the, the, the inflation readings that we're talking about. And again, this is before, this is before April 2nd, but we recognize that, you know, the, the,

rhetoric was increasing. So we were very concerned that things could get worse. And of course, they have gotten worse. So the numbers that we had before April 2nd, we had numbers of inflation was coming in. We thought it would be like 2.8% or so, maybe around there. That's well above the Fed's target, but it's something that's manageable. We saw growth

you know, in between 1% and 2%, but at least it is positive. Now, when you start to talk about a stagflation scenario, it becomes just that much worse. You know, inflation readings, we'd probably be happy to see 2.8%. You know, you look at something for a stagflation scenario, well above 4% or even higher. Think about the Volcker years, right?

Right. Those ugly days. And that was also when we saw incredibly high oil prices. Now, I know we're talking serious here, but I do have to tell you a little story about my childhood when I was a kid and there was the OPEC fight and oil prices shot up to the roof and odd even events.

odd even days when you had to go to, my parents had to go to the gas station. So I wrote a song called

gas shortage. Well, I sang it to my parents and to all the family. Of course, I did not become famous, but that was one thing that I remember back then. Fortunately, right now, we don't necessarily see oil prices climbing to that level. And, you know, in U.S. now is a big generator of energy. That's something that wasn't that happened in the 1970s. But, you

We could see, and one of the fears that I would have is that that stagflation scenario, maybe not, hopefully not as bad as the Volcker years, because a lot of things have changed, but kind of a more mini stagflation scenario is a real concern. Inflation going up to say four and a half to maybe even 5%. And that means the unemployment rate would also tick up higher and

You know, this 4.2% number that we have for unemployment, well, that might be a day of the past and, you know, and certainly that would challenge that nice jobs market that we're seeing right now. I think the Fed's probably worried about that as well.

Definitely. I love the fact that you've like foreshadowed your entire career by sitting there and making up songs about the economy when you were a kid. When I was seven. I love that. So I'm going to put you on the spot. And I am sort of curious, the odds of a recession in 2025, how do you see them now? You've sort of talked a bit around it, but I'm going to pin you this one. I want to know what you're seeing.

Well, I'd say I'm probably one of the optimists in the markets right now. And I do have to say in January, we were like, you know, thinking maybe 20% growth of recession risk. Well, now why don't we double it? And I would have to say, you know, so right now we're thinking 40% recession risk is not out of the question. And it could be in, you know, and my concern is the odds are even getting higher.

I am very concerned with a stagflation scenario at this point in time. But again, a recession scenario, much more severe, harder landing is certainly also in the cards. Gotcha. And this is for 2025. Do you think that we're going to be able to potentially avoid a recession in 2025 and then hit the road, hit the rubber, meet the road, if you will, in 2026?

You mean hit the rubber, meet the road, meaning a comeback, a bounce back, or are you saying things are going to get worse? Well, I am curious. What are your thoughts? Do you think it's more likely that we do get a bounce or do you think it's just maybe all downhill at a certain point? You could be a good economist. We're all pretty depressing. So in terms of what I would say for...

So could things change? Could we see things turn around for the positive in 2025? Well, you know, with 40% recession risk, that does mean that 60% still is base case. One of the things that we need from that is can we see governments kind of align, find a solution? And right now it seems hard to imagine that, but it could happen.

So that's one thing you could see that could turn things around.

In a stagflation scenario, if that were to happen, that's a kind of a longer and more painful period. It doesn't necessarily go into a recession, meaning we don't have that crash in the economy. And by the way, when you have that crash in the economy, you usually see softer inflation as well. But what you would see in a stagflation scenario is something that would be weak financially.

week higher unemployment and higher inflation both this year, and that would also drag on to 2026 as well. It doesn't end with a positive reading for 2026 as well. It would be a long, slow move. It's a long, slow crawl, I guess you could say. Gotcha. Yeah, it's interesting. I feel like there's a lot of theories out there at the moment on how

the economy will unravel at this point. I think you've got some folks in the camp that say, oh, well, because the market is doing so poorly, the so-called wealth effect is going to be the driver here and higher income households are going to pull back on spending dramatically. That's going to send us into a recession. There's other folks out there who, as we talked about, the employment

employment situation and the outlook there looks very grim. Employers are going to start slashing their workforce because they're anticipating the rising operating costs from tariffs. And then there's the folks that are sort of sitting there and looking at consumer confidence and sentiment saying, well, that has just been absolutely dismal. So you're going to have a really broad pullback

Of course, the last week, we've also had financial folks weighing in and saying, oh, gosh, have you seen have you seen the Treasury long term treasuries? Have you seen currency? That's going to be what sends us in. When you're looking at all of these different possible scenarios, what do you see as the most likely tipping point or where do you see things being the weakest that could potentially be where the economy unravels?

Well, one thing you mentioned, consumer, the consumers. So there, you know, the consumer is the largest, it's basically the bread and butter of the US economy. It's what I think you may have mentioned it. It's

80, 70% or so of economic activity comes from consumers. So keeping an eye on them and seeing that they're still spending is very tantamount in terms of what will happen to growth activity for this year and the next. Now, I know, you know, the confidence weakness is,

that people are pointing to consumer confidence and consumer sentiment readings from University of Michigan and from the conference board, all are now in recession territory. I think that University of Michigan hit the second lowest reading on record. That's pretty frightening. But one thing about consumer confidence readings is they don't necessarily track how people spend.

I kind of make the joke is that people are depressed, they spend. People are happy, they spend. So it doesn't really track it so well. And that to me says that while the confidence measures are a concern, I don't necessarily say that's going to drive what people do when they shop. Now, one of the things that I would be concerned about is what happens with, well, you mentioned it too, inflation and borrowing costs.

households have already been complaining about high inflation readings. They go to, they go and even if as an economist earlier on, maybe not today where we are today, but earlier on when we saw inflation readings on a year over year basis, coming down to say,

you know, a little bit closer to the Fed's target at 2.5% or 2.4, getting closer. We saw that as good news, but households didn't feel it because they'd go to the supermarket and they'd still see

In terms of dollars, that's still expensive. And when you factor in those high levels of pricing, that factors into purchasing power. People felt squeezed. Add to that the reason why we did see inflation readings coming down was because of the cure. That's Fed policy. So borrowing costs are now higher. People are getting squeezed both ways. That to me is something that we

with this new trade war in play makes it even worse. So you mentioned some of the other things that I'm factoring in. One of the reasons why I'm not as, I am concerned. I mean, it's clearly, I have a 30, a 40% risk of recession in the United States. But one of the things that gives me a little bit of breathing room is the job market is still holding up.

We mentioned the unemployment rate still near historic lows at around 4.2%.

Job gains are coming in relatively, they're slowing down, but they're coming in at around 150,000 job gains. That's a pretty nice reading for a U.S. economy that seems to be at full employment. And when I watch, I look at other indicators, job openings, they have slowed down, but that's what one would expect. And what we are seeing is that businesses seem to be holding on to workers, but letting go of basically job openings, getting rid of those new contracts.

And that to me still provides that cushion for households to continue to spend maybe a little bit less. And I'm certainly watching whether they're going to start to focus on, you could say, trading down for less expensive items or searching for value. But they still seem to be spending. And that to me gives the U.S. economy, the economic activity and outlook a little bit more hope.

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Do you see any signs yet that point to confidence, the slump in confidence turning into any real action? It doesn't sound like it, but I'm curious what you're watching in order to kind of really look through this. Well,

Well, we look at some of the things that we're looking at. And of course, this week is another big numbers that I'd call for all the folks listening on this call is to pay attention to what happens to retail sales for March. Now,

One of the things that's going to kind of complicate the numbers for March is that, and one of the, also another thing that we expect will provide some support for retail sales is the rebuilding impact. We had a horrible heart. We had horrible wildfires in the LA area. We had storms and damage done in a number of areas across the United States. So that means that rebuilding effect will, will,

kind of help, will help support spending activity from households both in March and in April and maybe even a little bit in May. So that's one thing to consider when we see what happens in March.

Um, I would say though, um, I would say another thing that we also look at and why I'm a little bit more hopeful that the March readings will come in. Okay. Not as strong as in February readings, but come in. Okay. Is that we look at some of the daily consumers, um, kind of daily retail spending activity and, um, uh,

And it still holds up pretty well for March, not dramatically so, but still holding up pretty well. And that also is one reason why we still see consumers out there spending, even though they're certainly depressed.

Makes a ton of sense. So let's shift gears a little bit. I want to talk a bit about the Federal Reserve. We've tiptoed into it, but let's really hone in. It seems like that officials may be really facing a challenging environment as the year goes on, and they may very well have to address this sort of weaker growth environment. But unfortunately, the usual medicine of cutting rates could make inflation worse. So if this comes to pass,

Which aspect of their mandate do you see them prioritizing at this point, maximum employment or price stability? Well, that kind of puts me in the exciting position of saying that, imagining that I would be a Fed member. I'm a voting member now. So how I would see the Fed playing this, and right now you have the Fed probably in the worst position. The worst position for the Fed would be when you have

there are two mandates, intention. Inflation, you know, stable prices is one mandate. And the other one, of course, is going to be full employment. And when they're intention, how do they handle it? Well, I would say at this point in time, if I were a Fed member, I look at the two, I would look at their playbook. And well, I'd say like, okay, well, where is their targets? And

Inflation, most of us know that the inflation targets for the Fed, and they usually rely on core inflation, that's excluding food and fuel. And they also particularly rely on the personal consumption expenditures core inflation indicator. Why do they use that instead of CPI? Well,

the PCE indicator allows for the substitution effect, CPI doesn't. It allows, for example, if the price of chicken jumps through the roof, but it turns out steaks are real cheap, the PCE indicator allows for consumers to switch and that softens the readings.

So if I were to take that into account and looking at inflation readings, their target now is at 2%, remains at 2%. Well, the current inflation reading is, I believe it's at 2.6. It came in a little lower, 2.8, I think it is, or around there. And the fear is it's going to get higher. Well, that gap from their target is pretty wide, where if you look at their

Their employment mandate, just taking a look at the unemployment rate at 4.2%, well, that's practically at the historic lows.

So their gap from their target is pretty much, there is practically no gap at all. So if I were a Fed member, I'd be targeting the inflation component and not the jobs mandate because it looks like the inflation gap is much larger. That's why I'm not surprised that the Fed is talking about, worrying about persistence in inflation readings.

And that they seem to be pushing back on markets, pushing back and saying that they're still cautious and they're ready. They're still in a wait and see mode. So if you're if you're thinking that the priority is probably inflation at this point, what's your forecast for rate policy this year? How many cuts or? Well, I think. Yeah, I think markets I don't know what markets are pricing in for for rate cuts this year.

To me, that seems very wishful, very, very hopeful. God bless them. You know, I mean, I hope I hope things go well. Actually, no, I think with the market pricing for for rate cuts, they're pricing in a recession now.

And, and they're also pricing and probably softer inflation with that kind of reading. And that, to me, seems less likely. I would say that the Fed if I were a Fed member, I would say I'd be, I'd be on hold at this point in time, I would say that maybe.

Two rate cuts could be in play, but I think it's going to be pushed out. I think that the Fed, just like markets, are still in a wait-and-see mode. They're waiting to see how policy unfolds. My fear, of course, is that the Fed may

have to wait a lot longer than even that. We'll see what happens. But, you know, the Fed, they feel our pain, but they'll have to move on even if it is a painful process. And could we see the Fed just stay on hold through the year? I'm not ruling it out, that's for sure.

Okay. Well, I feel like the Fed policymakers, when they look at core, it's like, oh, nobody eats. Nobody goes and travels or gas prices. So yes, they feel our pain, but we'll

see how that plays out. I do want to get to some questions that have been coming in, just pouring in from our listeners. And so there's actually been a bunch of questions around currencies and particularly the slide in the dollar. And I'm wondering if you can provide some kind of insight in how you're looking at that.

because I do think that heading into the year when we were talking about tariffs, that it was the idea that the dollar was going to get stronger. And that hasn't materialized, especially in the past week. Can you talk us through, you know, is that a concern for you? Is that something that you're looking at closely at this point? I think that one, I mean, there's probably a lot of factors that are at play with the dollar. And one thing to take into account was the dollar was incredibly strong beforehand. In fact,

Everybody was ready to take vacations abroad because of the dollar strength. Now in time, I think one of the factors that probably are at play with why the dollar is weak, well, again, markets are pricing in a recession at this point in time, and they're pricing in a very, very accommodative Fed with markets pricing in for rate cuts. That would feed into very low interest rates, and that would also mean that the interest rate gap would

between foreign interest rates gets weaker, making the dollar less attractive. And of course, the other question is, are you seeing money being pulled out of the dollar? I'm sorry, the money being pulled out of U.S. safe haven currencies, which is a surprise because usually what we would expect to see is weakness. Fear of weakness would send the money into the

U.S. safe haven, you know, treasuries, for example, but we're not seeing that. And I think the fear, of course, is what is happening with inflation, what is happening with the question of the U.S. economy weakening, and of course, that stagflation fear. I think that's probably what's at play. Will the dollar remain strong at this point in time? You know, I guess in some ways, you

I'm sorry, will the dollar remain weak at this point in time? I think, again, that goes back to the policy concerns that we're all kind of trying to scratch our heads on at this point in time. That makes a ton of sense. One thing I wanted to mention, one thing that I didn't mention, and I don't know if you wanted to go into that, is, you know, we were talking about high inflation and high now, the quest of probably higher interest rates, right?

You know, I was worried for some time about affordability constraints on U.S. households because of the hire for longer concerns. Now, with this new dynamic, I'm concerned that could get even worse. Now, right now, households do have, you know, that cushion from the jobs market.

But, and of course the, the, the savings rate is also higher and that's also good news. But the worry of course is that could be a constraint and could weigh on growth. Maybe not, maybe this year, but also the next. Yeah. People hiding money under the proverbial mattress, if you will.

There was a question that came in, and this is echoing across a couple of them, that there was a concern last week in particular about the stability of the bond market. And there was a lot of commentators weighing in about the Fed intervening and whether they should, whether they could.

When these kind of, you know, sort of things start percolating to the surface, what do you look at? I mean, and how do you think the Fed would intervene in a situation like this, you know, at this point when it comes to, you know, the Treasury yield curve and things of that nature? Well, yeah.

I know that I understand that the Treasury yield curve basically went up across the curve. And you also saw that with the 10-year rate also climbing higher. To me, I think the Fed...

it's kind of doing the work for the Fed. You know, if the Fed is, if, if the Fed is saying that they need to keep interest rates higher for longer and borrowing costs higher for longer by Fed policy, isn't that doing the work for the Fed? So maybe, so maybe in a sense those higher borrowing costs will slow, will slow economic activity, slow, slow, slow spending, and also,

put a little bit of a downward pressure on the inflation call. The Fed's worried about inflation, and this would be one thing that might be doing the job for the Fed as well. Sorry that the bond market might not want to hear that, but that in a sense I think is probably doing some of the work for the Fed. Gotcha.

I have a question here, and it actually kind of ties into something I've been thinking about. I mean, obviously, we've been a bit on the gloomy side of this call. But, you know, are there things that you're seeing that could prevent an economic meltdown or maybe just things that you're maybe more optimistic about within the U.S. economy these days? Yeah, the...

I know that when I have my mom asking me about recession, I know people are worried. And I get it. I mean, it is a concern. But let's think about some of the optimistic sides, some of the things to remain hopeful about. I mentioned the jobs market.

The unemployment rate is incredibly low. It's lower than what would be called the, what the Fed would call the natural rate of unemployment. The natural rate of unemployment is when the unemployment rate, I think it's around, I think they call it now at about 4.6 maybe or something like that. That usually means that you could be at that level and not have inflation. Growth would go along. Everybody has jobs.

but no inflation. We're a little bit lower than that, and so that's a little bit more inflationary. But still, it's a strong jobs market. I think that's one positive over the near term, and it provides a cushion. Another cushion for the U.S. economy, I mentioned it briefly, and that's that the savings rate now is around, I think it's about 4.6, I think the most recent reading. That's

I'm thinking going back four years ago, I think the savings rate was around two or three. So people have a little bit of cushion. Now, I know it's not across the income bracket. Lower income households are squeezed, and I don't want to ignore that. But overall, at this point in time, on average, households are in a little bit of better shape, and that also provides support.

for U.S. spending going forward. I'd also say that's the case for businesses as well. Businesses' balance sheets are holding up relatively well. I would suggest to the listeners, take a look at what's happening with, it used to be called the flow of funds report, and now it's called, I believe, the accounts of financial assets. That also indicates that businesses are holding up relatively well at this point in time.

On the long run, and I want to kind of remember that this too shall pass. On the long run, one of the things that I'd look at is oil prices are holding up. Oil prices are still relatively low, and that's a boost for the U.S. economy given we are energy producers at this point in time. And I'd also want to note that longer term, AI is a big boost going forward.

AI, while it may not be seen just yet, but I'm getting more hopeful that that could be one of the new productivity boosts for the U.S. economy and the world.

I like all of that. That sounds like, you know, good news. I am always curious, though, because I know you're watching the data and I'm watching the data. Everyone's watching the data. Are there any kind of quirky indicators that you're watching these days that may not be the retail sales, may not be, you know, the jobs report, things like that, but beyond the normal spec?

spectrum that we kind of look at? Are there fun little things that you're monitoring that you think are a good indicator, perhaps just benchmarking things? Yeah, that always is a little fun. Of course, everybody, I'm sure, looks at the jobless claims numbers, and that also is rather stable, another reason why I'm still positive about the jobs market. But let's talk about some funny ones. A

One that's maybe not so funny, but kind of matters when we talk about the trade war is the cardboard, basically cardboard boxes. Everything that we buy usually comes in a cardboard box. And that's a nice indicator for our businesses buying stuff to fill their inventories, either stock their shelves for the for cartons.

ongoing spending. Because keep in mind, this is the time when businesses get retailers, for example, get ready for the holiday season. They start in April and in May. And so you're going to wonder, are they buying enough to stock the shelves? Are they also fearful? So if we start to see cardboard box demand drop, then that would signal that, well, businesses are saying, I'd rather not take the chance. I don't want to have inventory on hand.

That would lead to me being much weaker and having to sell this stuff at a much lower price and squeeze my profit. So that's one thing. But that's a kind of a boring one. The one that I love, and it's so cute, especially because I have a young son, is the Tooth Fairy Index. There is indeed such a thing, the Tooth Fairy Index.

How much does a tooth go for these days? And now I'm thinking again, dating myself, I'm thinking I used to get maybe, I used to get maybe 25 cents, maybe 50 cents for a tooth, maybe a dollar if it was the big tooth.

Now you're getting, my son's getting something like $5. And I'm wondering if the tooth fairy is getting complaints because of inflation and she's got to raise it now to say six, seven, or maybe eight. Or if the tooth fairy says, nope, sorry, I can't afford that. We're going down to $2 this year. So again, something to watch and it's something fun to talk about with your kids.

Oh, that is fun. Cardboard boxes and...

The tooth fairy. I mean, we've got spending, we've got inflation. This is great. I'm going to have to add those to my list of things to cover. You know, I want to get to one last question from our audience. And so, you know, it was sort of interesting, you know, we've gotten a ton of questions on employment and, you know, what you're seeing, unemployment rate, things like that. We also got a couple actually on wage growth. So I think this is going to be our last question.

Because households are clearly under stress from, you know, higher prices, things like that, you know, is there a chance that we actually see wage growth either hold up or actually maybe even accelerate? Or is there just, you know, a real grim outlook there? In terms of wage growth, it's funny you should say that. You could see...

So wage growth came in, the most recent jobs report, wage growth came in pretty nicely. I think it

All I know is that in real terms, it was above zero. So in real terms, it was positive, meaning that purchasing power was holding up. In terms of what you could expect for wage growth going forward, now this ties to another thing, which was immigration. And it's funny, I'm going to bring this up. One of the things that could actually pump up wage gains or wage growth is because of tighter immigration.

which as an economist, that was good because we saw more labor supply, more businesses were able to find workers that they need. So you saw kind of a rebalancing effect in place. But at the same time, that increase in the jobs market or the labor supply also probably put a little bit of a lid on wages.

now with a bit of a tighter labor market because of one reason could be immigration, that might give a little bit of a lift to wages. So this person who asked that question or the people that asked that question, that might mean that 2025 and 2026 might see a little bit more of more strength in wages than you would normally expect.

So I guess that might be a little bit of a silver lining when it comes to some of the things that we face today. I'll take any silver lining I can get. And it sounds like we're going to have to leave it there. Bethann, thank you so much for taking all this time. I know we could talk for hours on all these subjects, but I think we did a decent job about getting a dent in what all is going on in the U.S. economy. So appreciate your time today. My pleasure.

Next week on Barron's Live, the subject is going to be gold. So for all the gold bugs out there, definitely tune in. This is going to be fun. You know, it'll be back with our normal stalwarts, Lauren Ruplin and, of course, Ben Levinson are going to be talking with John Hathaway, the senior portfolio manager at Sprott Asset Management. And they are going to be talking all about the appeal of gold and other precious metals, particularly in this volatile environment. So stay tuned for that. Thanks so much, guys. Think about a bicycle.

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