Teaching Inside Economics
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Welcome to Inside Economics. I'm Mark Zandi, the Chief Economist of Moody's Analytics, and I'm joined, ah, Marissa, you're back. I'm back. Did you miss me? Absolutely. Are you kidding me? I mean, it was devastating without you around. I had to deal with this guy by myself. All the stats games have an asterisk behind them now, right? Oh, I never thought of that. You're right. Yeah. The same.

Yeah. Actually, we didn't play the game too much the last couple of three weeks. Did we, Chris? I think we even gave up. It was just not the right mood. Yeah. So how were your travels? They were incredible. I was in New Zealand for two weeks and it's probably the most beautiful country I think I've ever seen. Yeah. And I've traveled quite a lot. Did you find that hamburger joint I told you about near Auckland? I...

I saw it. There were long lines for it. Oh, really? Yeah. Yeah. So I did not get a hamburger from there, but walked by it a few times. I'll tell you, I'm not really a connoisseur of hamburgers, but that hamburger in Auckland was, I still taste it. I still taste it. Yeah.

Anyway, but you got to the Southern Ireland and you were in the Northern Ireland and the Southern Ireland. Yeah, yeah. Basically did a road trip all the way from Auckland, which is top of the North Island, down to Queenstown in the South. Oh, very cool. Which is where I left my credit cards and my driver's license. Oh, bummer. You have to go back. I'm dealing with it. At least it wasn't my passport. I was able to come home.

Oh, you lost your cards and you lost your wallet? I left a bag with my credit cards and my driver's license. It's sitting in the airport in Queenstown and then- Bummer. Yeah, back north. So-

A little bit of a stressor at the end of the trip, but nothing catastrophic. But yeah, it was a wonderful trip. But you're back. It's good to have you back. And this is a special podcast. We recorded a podcast a couple of days ago. You missed it, Marissa. We talked to Alan Blinder again. I know. I heard. It was great. It's great. But we have a guest today, Alice Kassens. Alice, good to see you. Good to see you. Thanks for having me. And where are you hailing from?

I am currently sitting in sunny Salem, Virginia, which is near Roanoke out in the western part of Virginia. Oh, very cool. Are you from that area? No, I'm from Wilmington, North Carolina, but I teach here at Roanoke College. So I'm sitting on our pretty campus.

I just heard that Southern accent. Did you hear that, Chris? A little Southern accent. Just a little bit. A little bit. And you're an economics professor at Roanoke University. Yes, I am. I've been here 20 years here at Roanoke College teaching economics. You know, I've never been to Roanoke. Have you guys been to Roanoke? I've never been there. No, I don't think I have. It's a lot like Asheville, the way it looks with the Blue Ridge Mountains, but it's less known, which can be nice. Less crowded. Yeah.

So, Alice, tell me, you've got a lot of claims to fame, but the claim to fame that we're most focused on, because it made us feel really good, is you wrote a paper about inside economics, right? I did. I did. Would you want to give us a little bit of your bio and then a little bit about that paper and give us a sense of that? Sure.

Sure. As I said, I teach economics at Roanoke College. Been here for 20 years. Went to North Carolina State to get my PhD in College of William & Mary. It's where I went undergrad. I ran track and field cross country there while I was a student.

I specialize in health and labor economics. For the last three years, I've been a research fellow with the Federal Reserve Bank of St. Louis, their Institute for Economic Equity, which is headed by William Rogers, who was actually my advisor when I was in college. So he knows all my bad secrets about when I was late for class and...

What I tell my students not to be, he knows my dirt. So I have to be very on good behavior with him. I do a variety of things here. I teach econometrics, principles and labor economics, which is how we'll get into the Moody's Inside Economics podcast.

But I also do the Virginia Consumer Sentiment Index. We use the same questions as Michigan, but we only ask Virginians. So that is interesting. We do it every quarter. And then next year, I will be the first dean of the School of Economics, Business Economics and Analytics at Roanoke College because we're changing our structure. Well, I guess we'll see how it goes. Congratulations.

Well, I noted, because we had an email exchange back and forth, it sounds like you're a big runner. You run a lot. I am. I am. I got my workout in this morning before our podcast, so I'd be ready to rock and roll. Well, I admire that because these other two guys, they do foo-foo sports. Chris is bocce ball. That's all he does.

That's all I do. He's good at it, I hear. He wins like global competitions at bocce ball. And then Marissa, she boats some medieval boat race or something. I don't know what it is. No, no, no. Wait. You swim with the porpoises or something in the Pacific. It's really bizarre. Yeah, that's what it is. That's what it is. All right. You got to be like Alice. Alice, when you say you run, how far do you run? Right now,

now I'm doing about 50 miles a week. I did 20 repeat 400 repeats this morning. My coach gave me quite a challenging one. I was hoping I wouldn't have brain fog before I came on. I think I'm okay. You're coming through loud and clear. Do you have any comment on bocce ball though? Just ask. No, I've never, you know, I just see it in the movies. So I have never attempted it at all.

No comment. No comment. Chris. You have to come up. We've got some great words. It's very European, very Italian, maybe. For fiancé drinkers. That's very funny. There you go. There you go. Mark, what are your stats, running stats looking like these days? I'm an old man. You know, like every time I get injured, I'm so scared of getting injured because every time I get injured, I lose a step and I never get it back. So like now I'm running...

Alice, I'm not even in your league, but I'll run four miles and now I'm like at 930 a mile, something like that. But it wasn't long ago I could run seven minute miles, but with each injury, I just literally can't get it back. It's just- Health depreciates. Mine certainly is. I turn 50 next week. So I have to, I too have to start being very careful. Well, you're in great shape. So that's great. That's good to know. So, okay. Yeah.

Chris, how did we find Alice? Who alerted us to this great paper she wrote about inside economics? I can't remember. Do you recall the history here? Yeah, it was through LinkedIn. LinkedIn. And I'm trying to remember the specifics. I think, Alice, you may have posted...

A reaction to one of our episodes or something, something to the effect that, you know, we needed to. Do you like Mark? She thought Mark was a great host. Well, not only that, but you all stopped using cowbells. And my students were very upset about that. You've kind of moved away from the cowbell situation. We'll bring them back. We'll bring them back. Marissa should be getting cowbell every week.

That's the old version. That was the previous when we had Ryan. Do you remember Ryan? Ryan? Oh, yes. Yeah. Right. So we made these up back then. But we'll be sure to ring that if I win. If we don't win, we're not ringing that when we play the game. But anyway, go ahead, Chris. That was it. So you reached out and I clicked on the link. I saw this paper. I read it. I shared it with everyone online.

all of the hosts here immediately and then we discussed and we reached out to you, Alice, and thought it'd be a great idea to have you on the show to explain the paper. And we're really excited about it. Yeah. So you want to just give us, this is in the Journal of Economic Teaching. I'm very curious in that, I hadn't heard the journal, I'm curious in the journal,

And, you know, why you decided to write the piece on Inside Economics. Yeah, so the journal is a fairly new one. I'm an associate editor, but I did not review my own paper. It's a double blind review, you know, journal that we've just got it going, really focusing on economic pedagogy. That's its whole focus. And

unlike Journal of Economic Education, which is also a very big journal, ours is really how do you do these things? So these innovations you can use in the classroom so that someone can read it, take it and run with it. So much less collecting data on its effectiveness and

which is trouble if you work at a place like Roanoke College where my classes can be as small as 10 people. That sample size won't give me anything. So that's why I picked that journal. It's a very, very good journal. The way I got into it, I have to make sure my husband told me I had to mention this. The way I got into the podcast and what kicks off the story is during the pandemic, because you all started, I think, 2021 is when your podcast started, somewhere around there. Yeah, you know.

We were debating that. Is it four years that we've been doing this in April? I can't remember. Sarah, do you know? Is it four years? 2021 you started. 2021. So April of 2020. Well, yeah, four years. It'll be four years. Yeah. What episode is this, Sarah?

We're coming up on 200 regular episodes. Wow. Oh, okay. Very good. Okay. Yeah. So I was, you know, that was still pretty, we were shut, not shut down, but we had to be really careful still in 2021 about what we did. So a lot of my running I did on trails because I didn't have to worry about running in to people. And we live very close to the Appalachian Trail. And I came home and told my husband, who's also an economist, he said,

that I was worried that I was only listening to podcasts about murder in parks and I was running in parks. I was a little concerned I might become an episode. And so I was looking for a new podcast and he told me about this great economics podcast inside economics. And so I listened to that on my Sunday long run ever since then. You all join me, you may not run Chris, but you go with me on my Sunday long runs 'cause I listened to it on Sundays.

And as I was doing that, I was wondering, how can I get my students into this? Because I think they really enjoy it. It's this great banter that you all have. You feel like you're just in this conversation. But it also teaches students about how to pick through data and how to apply that data to explain what they see around them in the economy.

And so I was going to teach labor economics. And I thought that that was a great place to introduce it because there's so many labor reports that come out on a regular basis. And that class, the students have to have principles of micro. So they have a basic understanding. And so I incorporated a couple of assignments in the class to take advantage of several pieces. One, I gave them when the labor employment situation reports came out, three of them came out during the semester.

And then the employer cost index, I think one came out during the semester and then JOLTS, three of those came out. They had to listen to your podcast the Friday when those came out. And then we talked about it Tuesday in class and they were great on their participation. And so they each came with a statistic. So they play the statistics game. We limit it to a small amount of time.

But they got better and better with it over the semester because they had to, you really have to know the data to know what clues to ask. If someone says 20%, you're pretty clueless if you guess unemployment rate, right? And so they got more data savvy, or as I said, they improved their data literacy, which is something I really wanted because that's so important in the profession of economics.

And so they did a game and they enjoy competition. You know, you've got, you know, guys in there that couldn't care less about economics, bless their hearts. But they really got into the competition and really started learning a lot. And so we use the cowbells. I gave them each a cowbell. And so if someone got the statistic, they would ring the cowbell. But this also built this camaraderie in the classroom because even outside the assignments, you know,

If someone did something really great, whether it's answered a question in class or inducted into PBK, you know, some great accomplishment, we would ring the cowbell for them. So we're all kind of supporting each other. I did warn students.

the professors on either side of me, that there was not a herd of cattle about to roll through our building because we would ring them very loudly, doors open. And then it started getting really fun and enjoyable, the aspect, it really built this great environment. We even rang it when one of our young men walked into class with one of the best mullets you've ever seen. I don't know if you know, those are back in fashion.

Oh, that's a hairdo, isn't it?

And I assigned them a particular report that had not come out yet, but would come out before they had to present. And they had to put together what we call a mock podcast. Mock just because we didn't record it, but they sat together in a little group and pretended they were each of you. Some of them even pretended they were Mark Zandi.

Oh, wow. Yeah. You didn't record that, did you? No, I wish I should have. I should have. I am teaching labor economics again starting January, so we may have to move on to the recording bit. But they did just like you all, but on a shorter timeframe and just debated and discussed the report that came out, for example, Jolt's report.

and talked about what they thought it meant for the economy. So they had to research it by looking at the prior reports, what they had already read, but kind of put them together and tell a story. They ribbed each other a little bit like you all did and made people laugh. So it was really enjoyable. And so I graded them on their presentation and accuracy, and then they did a little peer evaluation. But they...

take away from the assignments is they really enjoyed it, all aspects of it. And they still, some of them still listen to the podcast now. So you have really gone into the minds of young economists from Roanoke College. Very cool. That's a great story. You know, because you're so into data, we have a website called

called Economic View, where we cover economic statistics around the world. So every time there's a release somewhere on the planet, one of our economists is covering that and gives the reader a sense of what the economic statistics means. And we'd like to provide that access to you for free. We're going to give that to you as a gift. Oh, wow. That's even better than a cowbell.

And if you have any comments or suggestions about the economic view, we'd really appreciate that as well. Okay. Great. We'll use that starting next semester. Yeah. We know you're into data and there's plenty of data up there. Talking about data and just moving on a little bit, I know you've done a lot of work around kind of sentiment. You mentioned you managed the Virginia Consumer Sentiment Survey. Yes.

And I know you wrote a paper around mental health during the COVID period. And you wrote a book about the... It's called Intemperate Spirits. So I forgot the word. What's the word for alcohol? What was that? A prohibition. Yeah, about prohibition. Prohibition with a capital P. Prohibition with a capital P. And so I just want to get a sense from you

There's been a lot of discussion about the vibe session, people being very upset about the economy and how it's performed for them. It just seems incongruous with the overall economic statistics. Given all the work that you've done in this area, what's your sense of things? How do you think about the vibe session?

Yeah, there is a disconnect, it seems, between what the data is telling us and then what people are telling us in these kind of surveys like Consumer Sentiment. And so just like the national one, we ask the same five questions that Michigan does to get, but we only interview Virginians. And we get a sample about 700, so we have a nice sample size.

And we saw that until the last six months or so, because we do this quarterly, the last six months, consumer sentiment kept falling. And it was really hard to explain. I'm talking to reporters telling them you've got this robust economy, strong labor markets, food prices even starting to come in, which is what people see and think most about when they answer these questions.

And consumer sentiment questions are so tightly linked to inflation. You know, the other surveys are more linked to the labor market, but you know, inflation was coming in, but it just wasn't showing up in our index until just recently. And so I don't know if that means inflation,

We're vibing again, the vibe session's over. But in Virginia, sentiment is coming up, but still it's way off what it was before the pandemic. Now, we only started collecting that data in November of 2017. So we don't have the Great Recession to see what happened in Virginia to compare it to. But we're well off where we were before, although trending, I'd say, in the right direction.

So you ask the same, is this a monthly survey, Alice? No, we don't have the funding that Michigan and Reuters do. And so we do ours four times a year, February, May, August, and November. Okay.

And you asked the same questions that the University of Michigan survey, the longstanding survey that's been done monthly back into the '50s. You asked the same exact questions. Yes. And we use the questions to create the indices the same way that they do. Got it. And in the University of Michigan survey, they also ask a lot of demographic questions to get a sense of who's responding. After they ask the questions about people's finances and how they're feeling about the economy, they say, what's your age?

the one that kind of quickly comes top of mind is what's your party affiliation? Are you Republican, Democrat, or Independent? Do you ask those same kind of demographic questions? - We do, particularly the party one, because the center, the Institute for Policy and Opinion Research at Roanoke College, where this survey comes out of, started as a political polling,

And so when we usually on our surveys, we'll have a bunch of questions. Some are for consumer sentiment, but others are about the election. So the November one we did after the election. But clearly there were questions on there. We wanted to know how people felt about the election outcome. So we always have that question for him to use in his results. But I do just out of interest cut back.

the index by party affiliation. And just like we had in the last two elections, there's this huge swing. So if you cut it that way, it just flips by these huge amounts, even though the average, you know, they average out because we're about 50-50 pretty much.

in our data set, even without adjusting for anything, Democrats and Republicans. So they wash each other out, but it's amazing to watch just, you know, in August feeling great, in November, just terrible. And then it flips for if your team won. So we see that in the Virginia data, because I do know they see that in the national data as well.

So in the, and I'm speaking from memory, so I may not have it exactly right, but in the University of Michigan survey, they asked the questions about finance, your person's finances up front. And then they asked the question, the demographic questions. But I believe about half the respondents are right.

resurveyed in the next survey. Is that the same case here? No, we don't do any resurvey. We do landlines and cell phones. We buy batches of phone numbers just as standard. But then we also, about two years ago, because labor costs were so high for running these surveys, they went up by a third in a very short period.

And we started moving towards, like many survey entities do, to using some web-based survey pieces. And we did some exploration to see if it changed. So we were doing the same method, but then adding these other pieces in to test for about six months to make sure. Because you would think cell phone is going to be more likely to be a younger person than the landline is more likely to be an older person.

And so we played around with a mix and found one that seemed to work. But we do not call back people that were in the previous survey. Yeah. Well, you know, as a listener to the podcast, you must know I hate the University of Michigan survey. Oh, I do. I do. Because I think it well, in their case, I think there was some bias. You know, once you ask the question, are you Republican, Democrat or independent, then

Everything you think about is thought through that prism, that political prism. And therefore, the results feel like they might be biased by just simply asking the question. But if you're not resurveying, then I guess you don't have the same problem, the same issue. Yeah, we don't resurvey. And they try to make the consumer sentiment questions very early in the survey, just because that's the big report that comes out of those four surveys. And so they want to make sure they get complete answers.

at least through there, because if they don't finish the rest of the survey, it doesn't bother me because I get the data I need. So the consumer sentiment questions are pretty early on sales. So don't get fatigued from being asked a fair number of questions. Right. And yeah,

You know, the Conference Board Survey, which is another national survey that's been done monthly since the beginning of time, never really – it's not been – it doesn't show people are ecstatic about, you know, what's going on in their economy. But it's okay. It's kind of typical average.

which feels more consistent with underlying consumer spending, what people are actually doing. And you can see that this past week with retail sales for the month of November. They were pretty good. No problem. So how do you think about that? What do you draw a conclusion from those two disparate surveys?

Well, so I think the Consumer Sentiment Survey, ours in Michigan, the questions are about household finances and things like that are much more correlated with inflation. Whereas the Consumer Board Survey, their questions, I think, have a stronger correlation with the labor market.

And so I think that's one of the reasons why we saw a big divergence of the two is we had inflation up at, you know, 8.9, 9 percent in June of 2022. But the labor market corrected itself very quickly. And so I think that is part of why there was that divergence. Got it. Got it. Yeah. Yeah. I mean, every time I talk about the University of Michigan survey,

In the negative, I get all these calls from everyone who works at the University of Michigan. I get very upset. But I said, just fix the survey. Come on, just fix the survey. But anyway, so thinking about sentiment more broadly, do you sense, because you've been teaching for 20 years at Roanoke.

Do you sense there's kind of a change in young people's kind of worldview, you know, the way they think about the world in terms of the risks they face and the risks that they're willing to take? Do you sense that at all?

I think a lot of what they focus on, especially the older students, so ones that are in econometrics are usually juniors or seniors. The main thing they're thinking about is how hard is it going to be for me to get a job? Because I mean, that's the main reason why they're there. You know, my charming personality, sure. But the most important reason is they want to get a job. And that's why their parents want them to go to college.

And so I think their worry, concern grows when there's risk for recession, just because once you go into one, the people that some people that suffer the most are the young folks, because if you're having fewer people to hire, you want someone with experience, not someone who's just coming out of college, maybe had an internship, but

um, maybe hasn't adjusted to the adult world yet. That may be a bit risky. Um, but we are trying to do things, uh, you know, teach students that you can't come to work late. So you need to get used to coming to class on time because that won't fly when you go out in the real world. Cause I think a lot of young people, I was the same way. You just don't realize that college is a bubble and the real world is not like it in many ways. Um,

You know, your boss probably won't care if you were up all night doing whatever they overshare to what you're up all night and you didn't finish your assignment because it's something that's needed and they'll just move on from you. So that's that's kind of a trouble. But that's, I think, been going on since I started. Maybe it's gotten a little worse. But I think the main thing they think about is.

Are there friends that are a little bit older getting jobs? How long is it taking? And if it takes longer, that then causes them a lot of worry because they'll be on the labor market, job market within the next year. Yeah, I guess the reason I'm and this is just purely anecdotal. But, you know, when I talk to young people and by the way, it varies depending on where I am in the world. You know, there's very I'm fine, very different people.

kind of world views perspectives positive and negative around the world but here in the us i i just get the sense that young people are just more tend to be just more nervous about things than they have been historically right that maybe this goes to covid maybe this goes to uh it goes to social media because you know the troubles of the world are in their face immediately they can see it right away and they can see it in video it's not just it's not just written

I'm not sure, but that's my sense, that young people are just more –

generally. Have you seen the same thing? Does it feel... Yeah, I think there's been an increase and certainly the data shows that the research that I've done looking at, it's largely anxiety, but these are surveys where they ask a battery of questions that are standard modules for determining anxiety. And young people, 18 to 24, do experience greater anxiety and it has increased over time.

But then when you anecdotal evidence looking in my classes, you know, I think it varies by student. You have some high performing students that are just nervous about everything. That's just how they operate. You know, they usually have a 4.0 and they're nervous about getting a job. He relaxes with his bocce ball, but other than that, he's a nervous wreck.

And then you have others that, you know, you're lucky if they show up a time or two. That's Marissa. That's definitely Marissa. And they're not nervous at all. You know, those are the ones that should be the most nervous. She's swimming with the porpoises, you know, so. California cool. California cool. So there's a huge range. I think it's been that way. Yeah. Yeah.

Well, I've monopolized the conversation. Chris, or Marissa, I'll turn to you first. Anything you want to bring into the conversation with us before we move on to the stats game, which I'm now very nervous about, but the stats game?

So, Alice, I'm just curious how you think the teaching of economics has changed over the past 20 years. I mean, do you find that you have to engage in different ways with students to get them interested in economics than you did like 15, 20 years ago? I do. When I was in college, I went to a great place, but most of the classes were chalk and talk. That was just the standard way of teaching classes.

And then a lot of research has been done in teaching, which is fairly new. The last 20 years, I'd say, there's been an increase in studying how we teach economics. So the pedagogy and a lot of results have shown that students will stay engaged for about 15 minutes.

And then, you know, so if you talk for an hour and a half, you've lost them for the majority of that time. And so it's better to, you know, teach some point for about 15 minutes and then ask them a question or get them to do a little short group work. Nothing that takes a long time. It may take 30 seconds, maybe a multiple choice poll that you put up on the board. But get them engaged in different ways and then a lot of recall so you kind of, you

you know, go on to something that's very similar. So they get more practice with it. So I think classes are different. And I don't know if it's the students are different, but just we've realized there are better ways of teaching. If you want students to retain that knowledge. That makes sense. Yeah. I think people are, have shorter attention spans these days. He's given all the distraction. Yeah.

Chris, any questions for Alice? Yeah, absolutely. I was really excited about the data literacy piece or part of your study. I think that's so important and just speaks to the broader financial literacy arguments or discussions that are going on. And certainly when I learned economics, we didn't read Fed reports or follow the data. It was all new or fresh to me when I got to the business world.

And so I'm curious if this idea of exposing students early on to the actual data and the actual discussions that are going on, if that's catching on, have you seen any impact from your paper on other professors or you see other institutions adopting more of a data-focused approach? Yeah.

I think it differs by professor. Some are stuck in their ways and they're just going to chalk and talk it until the day they retire. But certainly my classes, my husband taught economics for over 20 years. And a lot of people we know do a lot more of bringing data into even principles classes. So if you talk about unemployment, let's just not talk about the definition that's in your standard textbooks. But let's also get into how is it collected? When is it collected?

You know, what are some issues, you know, that kind of thing, and more textbooks are getting more into the weeds about those things so Stevenson and Wolfer's textbook, which is what I use in principles, does a really good job of digging into those surveys, it could be because Betsy Stevenson, having worked at the Labor Department, obviously both very good economists theorize.

think that way when they do their jobs. And so they know to bring it into the principal's textbooks. And that's become a very popular textbooks. But I think students, they really enjoy it. I think they get bored when you're just talking about theories of interest rates. I mean, that is

A snooze fest. And if you're trying to keep an 18 year old off their phone for more than five minutes, you've got to do. And I don't mean make it fun because you can have things that are funny. Don't learn anything. And all they remember is you paid some Twinkie game in class, but making it enjoyable, but that they get something out of it and they learned they walk out of the classroom really understanding what.

why they were screaming about the inflation rate on the news that day so they can really understand what it means today and in context from previous years or months. That's great. Betsy and Justin, they were on this podcast, each of them. And Justin was pretty angry because Betsy was on first before Justin. But my husband is very envious that I'm on this podcast right now too. Yeah.

And they're both you mish, by the way. They're both you mish. You mish. And they get annoyed when you, as I said, when you diss their survey. Anyway, let's play the game. Let's play the stats game. The game is we each put forward a stat.

The rest of the team group tries to figure out what that is through questions, deductive reasoning, and clues. The best stat is one that's not so easy that we get it right away and one that's not so hard we never get it. And if it's apropos to the topic at hand, and we've got a broad area of discussion here, so we can go in lots of different directions. But if it's apropos to the topic at hand, all the better. We always begin with Marissa.

Marissa, you're up. What's your stat? My stat is 2.6% year over year. Economic data that came out this week? Yes. Government statistic? Would you ask Chris? I don't know. Related? Yeah. No. No. In the GDP numbers? Yes. Well, oh, real GDP growth year over year is 2.6%.

Through Q3 2024. That's true, but that's not what this is. Oh, no. She did that on purpose. She picks that that I will get and then tell me it's not that one. Very tricky. Very tricky. No cowbell for me on that one? No. All right. Okay. So another two points. That would be way too easy.

Well, it was year over year, you know? Okay. Yeah. Okay. Another 2.6%. Gross domestic income was not, was that, was it real GDI? No. Is it the average of GDP and GDI? Oh, that's definitely a cowbell. That is a cowbell.

Excellent job. Excellent job. Thank you. That's funny. Okay, so what's the deal, Marissa? Why'd you-

It's the highest we've had since the end of 2023, merely to show that we've been talking about the discrepancy often between GDP and GDI, that GDP growth has been running higher than GDI growth. And one way of kind of reconciling that is to take the average of the two that that's sort of

usually about where we think the economy is after revisions come into all of this data. So it's still quite strong, right? Even if you take that lower mark, you mentioned GDI grew at 2.1% year over year. GDP was 3.1% quarter to quarter, 2.6% year over year. So even when you- Excuse me, Marissa. So the number is the quarter to quarter annualized change. It's not the year over year. Okay, okay.

Okay, very good. So even when you average these two, you're still getting quite strong growth in the economy, right? So-

This was the final print on third quarter GDP. It gets three revisions, not including these benchmark revisions that happen periodically. But yeah, just to show that the economy is still going quite strong, kind of no matter how you slice it, whichever way you look at it, either GDP or GDI.

Yeah, I actually looked at that data, GDP and GDI. And the thing that struck me is how close they are tracking each other. You know, after there's you get the three revisions you mentioned, then you get other revisions, you know, an annual revision. And then I think it's every three year revision and many revisions.

with all the revisions that we've gotten, GDI and GDP since the pandemic really are very close to each other. There are very few gaps between the two, which suggests that that's what the economy is doing. That's a pretty good read on economic growth. Okay. That was great. That was a very good one. You want to go next, Alice? Sure. I've got a pair. Let's see. 1.1 and 0.05.

1.1 and .0. Do we get any units? Yes, they are percentages. Percentages. Growth rates? Yes. From a government's report that came out this week? Yes. Okay. And their shares of. Shares of. Growth rate.

Oh. Oh. Oh, is it something's contribution to GDP growth? Yes. Okay. Oh. Oh. The 1.1, consumer spending, that'd be bigger, wouldn't it? So would that be fixed investment?

Nope. No, government, not government. Could it be? It can't be. So we're, are we on the right track here? It's some component of GDP. Yes, yes, the component of it. And this is the quarter to quarter change annualized? Let's see. It's, yes, Q3. Yep. Okay. Annualized.

And in Q3, GDP growth annualized was 3.1. So you're saying 1.1 percentage points of the 3.1. So the biggest contributor- Was consumer spending, right? Yeah. It's more specific, but it's retail trade. Oh, retail trade. Which is huge. Oh, so you're focused on the-

Like on the output side of the economy. Yeah, this was in the BEA report, GDP report. Okay. It writes down that percentage that Marissa said down to what's the biggest contributor or what are the contributions from each. And so the biggest one, which is the 1.1, was retail trade. Okay. What was the 0.05 then? Well, just because of what I do, education. Yeah.

Okay. So interesting. You did it from the kind of the value added side of the account. Yeah. Oh, and the interesting thing about the retail trade is, you know, that is consumers. And sorry, retail. Yeah. Retail trade is from the consumer side. And so that tells us, like you all mentioned a lot, consumers have been the firewall to recession. And so if you've got retail trade very strong, that means consumers are buying a lot of stuff. And so that's, I would say, good news.

Yeah, just to take a step back for the listener, there's, and I'm simplifying, but there's three ways to add up to the economies, the value of all the goods and services that we produce. One is GDP, and that's kind of from the consumption side. So we look at consumer spending, business investment, net exports, government spending.

Then there's GDI, which we were talking about earlier. That's looking at it from the income side, you know, personal income, what people earn, corporate profits, and a few other sundry things. And then the third way, which is the way you are, you, you are looking at it, Alice, it appears is value added by industry and looking at it from the third way, which I,

I generally don't do, but that's really interesting. So of the 3.1% increase in analyzed GDP growth, 1.1 percentage points was

retail trade and you're saying basically zero was the work was education right there's some negative i don't believe it yeah yeah i mean what are we thinking here no yeah yeah what's that's a measurement problem no no doubt about it darn michigan survey your output oh maybe that's what it is yeah good point good point yeah that's great uh oh good that was a great statistic but no cowbells on that one we didn't kind of fell down on that one okay chris you're up all right

I'll give you a hint that this is a question that came up from a number of reporters this week. Two numbers, down 1%, or one percentage point, and up 0.6%. Ooh. Down, say it again, down one? Down one, and up 0.6. And your hint is that something- I got a lot of questions from the media. About this. About housing? Yes, it's housing related.

What came out? Home sales came out. It's not home sales. Housing starts came out. No, no. Not home sales, not housing starts, NEHB, that came out. Mortgage rates? Yes. Ah. One of them is related to mortgage rates. What's that, Chris? One of them is related to mortgage rates. Yeah.

Mortgage rates are up 1.1 percentage points. Mortgage rates are up 0.6%. 0.6%, okay. And then down one, you said. The Fed funds rate is down 1%.

in September. Oh, I got it. Yep. So lots of questions from the media because a lot of the public expects, oh, Fed is cutting rates. That means my mortgage rate's going to go down or I'll be able to buy a house. And we've seen just the opposite. Fed funds rate coming down while the mortgage rate and other long-term rates have actually gone up. How do you explain that? A lot of the things we've been discussing on the podcast around inflation expectations, right? Certainly inflation came in hotter than what we've seen, right? So the PCEs

You know, not going down to 2% quickly. Inflation expectations are up because of the policies, right? So those longer term rates got a boost actually this week instead of experiencing a decline with the Fed funds cut, right? So with those higher longer term rates, the mortgage rate is tied more closely to the 10-year treasury than it is to the Fed funds rate.

Right. Right. So what's the fixed mortgage rate now? Is it over seven? It's 6.7. Oh, that's the Freddie Mac rate. Yeah, that's right. Yeah. The actual rate now, if you go and try to get a mortgage, it's probably over seven, right? Closer to seven. Yeah. Yeah. Probably. Probably.

I don't know. Alice, what do you think about that? I think that was a little weak to be- I don't think- I think it fits and I bet you got a lot of questions about that because it is a conundrum. Yeah. Yeah. I mean, the Fed did- We didn't talk about this, but I mean, the Fed did lower its forecast for the number of rate cuts next year. So-

Despite the rate cut, mortgage rates seemingly rose right after the Fed announcement, just a lot, lot. They also increased their inflation expectation. Right. So that's the key. All right. I'm going to give you mine. Ready? All right. We're ready. Probably on the easy side. All right, Alice, you got it. 4.5%. 4.5%. Wait, is it the 10-year? Yeah.

Tenure treasury yield. Yeah. So that's up almost a full percentage point over the past three months. And if you go back three months ago, that's when President Trump started to win in the polls and in the betting markets. And of course, he won. And in that period, the tenure has gone from, I think it didn't get quite down to 3.5%, but pretty close. And now we're here at sitting at 4.5%.

And, you know, that does go back to, in part, the Fed's decision. I would call that, Marissa, what I call a hawkish ease. I mean, they eased interest rates, they lowered interest rates, but then they said, don't count on any more interest rate cuts. In the markets, investors were thinking, oh, we're going to get more interest rate cuts before the Fed said that. And so because of that, you saw this reaction in long-term interest rates.

Bond yields rose, the 10-year yield rose, and the stock market declined, although I just noticed the stock market's up pretty strongly today, but not the 10-year yield. That remains very high. And about half of the increase in the 10-year treasury yield since back in September, the past three months,

About half of that is inflation expectations. So investors are saying, oh, this goes to future economic policy and all likelihood tariffs, broad-based tariffs and immigration, that's going to affect inflation. So they built that in. And the other half of the increase in the 10-year yield was the term premium. That's long rates versus short rates. And that's influenced by a lot of stuff, but deficits and debt. So it could be that investors are starting to anticipate

Oh, we're going to get some tax cuts here. And it's not clear how they're going to be paid for. That's going to add deficits and debt. But but that four and a half percent is on the you know, it that's getting kind of to the high end of comfortable, you know, anything north of that.

that becomes very uncomfortable and becomes a threat to the broader economy. Okay, we got one cowbell out of that. Alice, congratulations. That was yours. Good game playing there. I thought maybe we'd end just discussing a couple different issues that have come up more recently and get everyone's take on it. The one that's in the news right now is the

the difficulty that Congress is having coming up with a budget bill to keep the government open. And if they don't get a bill passed here shortly and signed by President Biden, we're going to have a government shutdown. Marissa, do you want to give us a sense of, you know, we've been down this path many times before, so it's well-trodden, but just to remind us, you know, how things tend to play out here and what the economic impact might be?

Yeah. So there have been a little more than a dozen government shutdowns historically. The longest one was 2018, 2019, the last time President Trump was in office. That was...

I think it was almost a month long or around about there. But typically they're very short, right? Typically, if you go back before that one, they're one, two days. Sometimes it's a matter of hours. So the economic impact has not been very great when you look at all of the government shutdowns historically, right? It's kind of a drop in the bucket when you average them all out. So if Congress doesn't come up with a plan

Budget agreement by the end of the day today, then the government will shut down, which basically means that non-essential government workers will be furloughed.

People that are essential to keeping national security going, right? The military, some other government workers that are essential workers, Congress people will get paid. A lot of other people will have to come to work not getting paid for the duration of the shutdown. It can also affect private sector jobs, right? So if you think about government contractors that

contract with federal agencies, they may not work and they will not get any back pay, whereas federal employees will once they come back to work. So typically the impact is small. I think I was reading something that

We had written back in 2018 during the last government shutdown, and I was reading some stuff by, I think, Goldman Sachs on this government shutdown and estimating somewhere around a tenth of a percentage point off of GDP, right, for your typical government shutdown, assuming it lasts a day or two. So it's a small number.

economic impact, but it certainly has real implications for the workers that are not going to be getting paid. It has a pretty big impact on the, uh,

greater Washington metro area workforce where most of these people are located. And it will affect things like, you know, the one thing that people are pointing to now is because we're in the midst of the holidays, it could affect things like TSA security personnel at airports, that sort of thing. National parks won't operate. They'll be closed. So economically, it's usually small. And I don't foresee that, you know, if this happens,

Today, or after today, I guess I wouldn't expect it would last very long I think Congress is going to be really motivated to get a deal passed I mean they they had a deal in place right um

And then that went south pretty quickly. So we'll see what they come up with, but I think they're really motivated to get it going again. Goldman Sachs. What? You're relying on Goldman Sachs? You're not relying on Moody's Analytics estimates? Did I say that I relied on Goldman Sachs, Mark? Let's replay the tape. I said I read...

Well, he wrote something today by Goldman Sachs. I'm trying to get the information. Okay. Okay. Fair enough. But I don't think it's a tenth of a percent if it's a day or two. No. If it's a week or two. Yes, that's right. I mean, it's probably, yeah, it's probably almost imperceptible, right? Right. If it's a day or, and typically even the ones that have been a day have been more like four hours or something like that. Right. Right.

Right. I think the longest, maybe you said it was like 35 days. Was that the one in 2018? Yeah.

And that was maybe a couple of days. It was 34 days. Yeah. I mean, obviously it creates havoc for the poor federal government employees, right? Because many of them have to work. You mentioned TSA. They're essential. They have to work, but they don't get paid. I mean, they'll eventually get paid, but they work with no pay. Yeah. Yeah. Hey, Alice, how do you think about the government shutdown? What's your perspective on it? You know, it's one of those things that we keep...

they keep threatening and will it happen or not? Um, you know, there's a lot of incentive to, to not let it happen. Um, but of course there's some new things in the mix with, um,

tweeting certain comments. So that's kind of a new wrinkle. So it's hard to tell, is it more likely to happen because of this new element in the mix? Because I think it was your old show a couple of years ago, maybe when this was happening, I think it was 0.1% per week, a shutdown, I think is the estimate. Oh man, you are good. You are really good.

Cowbell for that. Yeah, I mean, that's substantial if it...

That's substantial if it goes on for a while, not to mention all the micro effects of individual workers without pay, temporarily at least, and being around the holidays, maybe you need some of that to buy your presents since that can be stressful. It will definitely be bad pictures for social media if you see congressmen getting on their planes to go home for the holidays without having a resolution. But it'll be interesting to see what this new

element of influential actors has. Well said. I wouldn't have said it as diplomatically, but nice job. Chris, what do you think? I think the biggest concern I have is that there are all sorts of

kind of known unknowns out there in terms of the impact. One thing that comes to mind that for me obviously is front and center is the National Flood Insurance Program. This time around, set to expire at midnight tonight, December 20th, if there is no deal made. So

Maybe that doesn't contribute a lot to GDP directly, but it starts to be an annoyance, starts to drag on potential home sales or does certainly put some people at greater risk for a period of time. So if you start to see some of these other little nits, if you will, crop up, they could certainly create some problems in terms of the broader economic picture if they persist. But I think that's...

We focus on the big kind of cost-cutting measures, but we kind of ignore or fail to recognize there are all of these tiny little things that could crop up if this were to go on for a period of time. I don't think it has anything to do per se with how long this government is shut down. I mean, in terms of the consequence of that, it's small, unless it really drags on, but it won't in all likelihood.

But I think what's more important, and I think it's a big deal, is what this signals in terms of the drama dead ahead. I mean, look what's going on.

Now, and you would think that there would not be a problem here, but a problem has been manufactured. And it just seems to me a signal of what we're going to see going forward. It's going to be one drama after the next drama after the next drama. And this has real implications. I go back to that 4.5% 10-year treasury yield. One reason it's starting to rise, that term premium is rising. Investors are saying, hey, guys –

I'm getting a little worried about deficits and debt in the context of the dysfunction that I'm observing in Washington, D.C. Look, I know the United States of America is the wealthiest economy on the planet. There is no...

It's difficulty paying investors back on the money I've borrowed, paying the interest in principle. You guys can do this, no problem. You can do it in your sleep. But will you do it? Will you do it on time? And these kinds of – this kind of drama, you know, I think is starting to seep into the collective psyche of investors and they're starting to say –

Are these guys really competent and are they going to be able to get it together in a timely enough way? Maybe maybe it's not going to be a problem around the government shutdown. But what about the debt limit or something else? You know, something some other issue. So I don't know. I my sense is that the alarm bell should be going off here. Not not because of the government's going to shut down or dare to. But just the fact that we're here talking about this.

you know, the Friday before Christmas. Come on, really? Come on. I just, you know, I just don't get it. So I think, I don't know, I'm growing more worried. I'm not sure I'm a buyer of 10-year treasury bonds at 4.5%, is that what I'm saying? Marissa, are you a buyer at 4.5% or a seller? I'm- Neither. I'm hoping. Marissa, are you a buyer or seller at 4.5%? I'm a-

I'm neither, but I'm almost a buyer. You're almost a buyer? Okay. Yeah. You're going to buy my 10-year treasury then? Soon, yeah. A little bit more. So you're a buyer or seller? I don't buy treasuries beyond one year.

I do like little ladder three, six, nine, one year or 12 months, but beyond, I don't want to part with my money for that long. Gotcha. Good, good move. Good move. Okay. Anything else we want to cover before we call it a podcast? I covered a lot of ground. Anything else? Alice is, you know, I can throw out an open-ended question. Anything you wanted to say, like, you know, that host on Inside Economics, you know, that

It's just incredible how he kind of weaves things together. You know, anything like that before we leave. The brilliance was truly amazing. It really was. Yeah. I need to get my ego stroked. Absolutely. After, you know, Marissa goes after, she goes, she really goes after me. Do you notice that?

I did, but it keeps you in place. It's good. You don't want the ego to get too big. That's right. Exactly. Exactly. I hear you. I hear you. Okay. Do you have any suggestions for us, Alice? Anything you'd like us to add? Oh, yeah. That's a good question before we leave. Or subtract?

No, I love the I know you said a podcast a while ago that people give you a hard time about some of the conversation, but I really enjoy the conversation, the banter back and forth. And my students really enjoyed that because it's kind of like what they do. So it really is like you're sitting in a room with some friends talking about the economy. And if you can make that exciting, you're doing something right.

Oh, that's very good. Nice words. We call that chit chat. Yes. I like the chit chat. Chit chat. Okay. All right. Well, with that, dear listener, we are going to call it a podcast. Take care now.