CJM hosts Dr. Anirban Basu from Sage Policy Group, presenting Show Me the Money (Supply). Soft landing? Something harder? This presentation will supply in-depth analysis of the major factors shaping economic outcomes, including central bank policymaking, worker attitudes, business confidence, and geopolitics. It will then turn toward a forecast for the year to come, highlighting the major risks that economic stakeholders will likely encounter.

Jessica Ness:

Okay, so we’ll go ahead and get started. As I’ve mentioned, I’m Jessica Ness, owner and senior vice president here at CJM, and we’ve got a great presentation planned for you guys today. I’ll introduce my speaker in a moment, and he will spend about 45 minutes taking us through a presentation. Then we’ll leave a few minutes at the end for Q&A and my colleague Parker Trasborg here. He will be collecting your questions along the way plus anything submitted to us prior. So we’ll try to tackle as many of those as we can. So let’s go ahead and get started. Again, welcome. Thank you for joining us. We appreciate you guys taking time out of your really busy days. I know there’s always lots going on. We value your trust, partnership, just really thank you guys for joining us today. We’re excited to welcome economist, Dr. Anirban Basu from Sage Policy Group.

We saw Dr. Basu most recently at one of our industry conferences, the FPA Conference earlier this year, and he impressed us in his engaging and interesting presentation. As you can imagine, that’s high compliments for economists that we run into. So as our clients know, we believe in education and awareness. To that end, we invited Dr. Basu to speak with us today. Now his presentation will supply in-depth analysis of the major factors shaping economic outcomes, including central bank policymaking, worker attitudes, business confidence, and geopolitical politics. Then it’ll turn to a forecast for the years to come, highlighting the major risks that economic stakeholders will likely encounter.

Now, Dr. Basu himself is a study in contradictions. He’s been called an economist with a personality, which we’ve seen, or alternatively, one with a sense of humor. He has been twice recognized as one of Maryland’s 50 Most Influential People. He has also been named one of Baltimore Region’s 20th Most Powerful Business Leaders. In 2014, Maryland Governor Larry Hogan appointed Dr. Basu as Chairman of the Maryland Economic Development Commission. Quite a mouthful, and he teaches global strategy at Johns Hopkins University and serves as the Chief Economist function for a number of organizations across the country. He has also read every one of Agatha Christie’s novels as an avid fan of James Bond, loves English football, Indian cricket, all the Baltimore teams, as do I, and lives with his wife and two daughters, Kimaya and Kohena. Dr. Basu, thank you again for joining us, and take it away.

Anirban Basu:

All right, let’s do this. Thank you so much, both of you, Jessica and Parker, for inviting me. I want to share my screen as it turns out, and going to go through some slides here. As had been noted, please use that Q&A function to ask your questions. Obviously, I hope to answer some of your questions with respect to the economy as I go through the material, but please don’t hesitate. Indeed, Parker and Jessica have told me that if there’s a question that fits neatly with what I’m speaking about in that moment, they’ll ask it while I’m going through the material. I will leave some time at the end parenthetically for questions and answers. My presentation today is entitled, Show Me the Money Supply. This is a Tom Cruise themed presentation. You’ll see that theming throughout the presentation whether you like it or not. I hope you don’t hate it, but it’s firmly baked within the cake.

This is Tom Cruise from the 1996 film, Jerry McGuire, in which he plays the role of a sports agent with a single client, the fictitious Arizona Cardinals wide receiver, Rod Tidwell, played by the actor, Cuba Gooding, Jr. In any case, it’s not about Tom Cruise so much as the economy, but the question then becomes, why wouldn’t an economist introduce the concept of money supply right from the get go? The topic of the economy is vast. So why because money supplied? Well, as it turns out, it’s at the heart of the matter. Much of the data I will show you today, our time series data. So the more contemporary data will be part of the right of the slide. This is Money Supply Graph back to 1959 and again, focusing on the right side of the slide, you can see that during much of the pandemic recovery period, this phenomenal growth in money supply. This is engineered largely by policymakers.

The Federal Reserve, expanding the size of balance sheet. Flooding the banking system with liquidity, driving interest rates as close to zero as was possible to try to induce people to borrow more and spend more, borrow more and invest more to countervail the worst effects of the pandemic on the economy. The federal government also is borrowing lots of money and spending lots of money in the economy. All of this [inaudible 00:05:03] to the benefit of money supply growth. From the perspective of economic recovery, this absolutely works. By the second quarter of 2021, U.S. gross domestic product is above its pre-pandemic level. So the pandemic undoes the economy during the spring of 2020. A bit more than a year later we’re back, at least along that dimension. However, that V-shaped very rapid economic recovery brings with it a bout of enduring inflation. The Federal Reserve, of course, has been contending with that for more than a year now.

They’ve been raising interest rates until recently, shrinking the size of their balance sheet, trying to reduce borrowing and spending, borrowing and investing to try to bring demand into conformity with supply to bring excess inflation out of the economy. So now money supply has been shrinking, you can see that heir. So money is more expensive, interest rates have gone higher, for instance. It’s more difficult to access. We’ll talk more about that and when money supply is disappearing, that can create some pretty risky business. One of the things we want to talk about are some of the risks inherent in the economy, and what’s the culprit here? Why have we gone from a period of very rapid economic recovery from the worst stage of the pandemic economically to speaking about the risk of recession in the next few months or at least at some point over the next 12 months? Well, again, the culprit here is inflation.

Now we economists, when we talk about inflation, we tend to talk about it in the context of its effect on interest rates and Federal Reserve policymaking. Of course, as stakeholders of CJM Wealth Advisers, many of us are concerned about that, not just as economists, but just as stakeholders in financial markets. But there’s another effect of this, of course, that’s on households. Households are walloped by these inflationary pressures and that, of course, has an economic impact as well. This is the U.S. Consumer Price Index 12 month percentage change. You see two lines here. The line in green is your overall rate of inflation, your all items Consumer Price Index, which over the past year has run at 4.9%, past year ending with April of 2023. Now the gold line is your so-called core inflation rate. That’s all items less food and energy.

Food energy prices are notoriously volatile but also susceptible to non-economic influences like Vladimir Putin as it turns out, but also droughts and natural disaster generally. So for much of this pandemic recovery period, food and energy prices are rising faster than most other prices. Now, food and energy prices have been generally speaking, falling more recently. So after the outbreak of hostilities in Ukraine, oil prices were trading above $120 a barrel. Today we’re looking at oil prices in the low 70s as it turns out. Egg prices have been falling since roughly December. I don’t know how many of you have become engrossed in a conversation about egg prices this year, often with neighbors. As you know, once you get involved in those conversations, almost impossible to extract oneself. Indeed, I delivered a presentation very early this year at the University of Delaware. The University of Delaware, of course, gave us the greatest quarterback in NFL history, Joe Flacco, but also their team name is the Blue Hens.

They’re the University of Delaware Blue Hens. I looked those Blue Hens right in the face and I said, “You ought to be raising chickens, you Blue Hens.” They also did not laugh at that. But the point is, egg prices were high and so it made sense to raise chickens. But since that time, those kinds of prices have come down. So we need stripped out food energy prices, you get that core inflation rate, that inflation measure is actually higher now, 5.5% year-over-year. In any case, inflation’s running well above the Federal Reserve’s 2% target, so the war on excess inflation persists even though the Federal Reserve has raised interest rates so significantly, and we’ll talk more about that in a couple of slides to come. Now again, there’s a cumulative effect to this because households are getting waylaid by this month after month after month, these high prices. So if you were to compare the price level in May of 2020, why May of 2020? That’s the first month of the economic recovery from the worst stages of the pandemic economically.

So we lost those 22 million jobs as a nation in March and April of 2020. We start to add back jobs in May. So if you look at what prices looked like in May of 2020 as the recovery commenced versus April of 2023, the last month which you have data, you look at the headline numbers down below, all items, Consumer Price Index up 18% in less than three years in a country that aspires to 2% inflation per annum. The so-called core rate of inflation down below, all items less food and energy, 15% inflation, again, in less than three years. The green colored bars show you things categorically, so energy price is up 55%. Used car and truck prices up 39% in less than three years. Transportation services, that includes things like airfare is up 27%. Tobacco and smoking product prices up 22%. New vehicle product prices up 22%. One of the worst things you can do, one of the worst things you can do is smoke in a new car because it’s bad for your health. It destroys the new car smell but renders also one susceptible to all these inflation pressures.

Of course, if you’re in Northern Virginia and Baltimore where I’m right now, it’s pretty smokey out there, thanks to these Canadian wildfires. So probably It’s just not a good idea to smoke generally. In any case, again, lots of cumulative effect here. Now it is true again that inflation has dissipated more recently. So to go back to the previous slide, back in June of 2022, if you look at this, overall inflation was running at 9% year-over-year. Now it’s down to 4.9%. So if I just show you the Consumer Price Index for the period April of 2022 versus April of 2023, just last year, you can see again the headline numbers at the bottom of the slide, 4.9% overall inflation, 5.5% on the core, but you still see some lumpy inflation rates here. Transportation services, again, things like airfare is up 11%. Shelter and food price is up 8%. Who does this affect the most, by the way? It’s people with lowest quintiles of income, people for whom food and shelter comprises a disproportionate share of their household budgets.

I think that’s one of the reasons the Federal Reserve is so aggressive in trying to get us back to 2% inflation. They know that people in lowest printouts of income are most affected by inflation include people on fixed incomes, let’s say people in their 70 and 80s as an example. So what do they turn to? They turn to their leading policy instrument, which is, of course, the fed funds rate, the overnight bank lending rate, the rate at which banks could borrow from one another overnight. Why do they do that? To throw up their reserves because you need a certain amount of reserves in the bank to make the loans outside of the bank, so you don’t want to run up against that constraint so that you want to make more loans. So here on the grant free the federal funds pocket range upper limits. I should point out that I did not create these slides, that was done by our economist, Sayer Niblett, who is a fabulous professional, but in any case, setting that aside.

So the lowest upper limit you can get here is 0.25%. Coming into the pandemic, the federal fund rate was non-zero, but then the pandemic sweeps through the economy. The Federal Reserve lowers interest rates as close as possible to zero, which is 0.25% since I’m graphing, again, the upper limit. It stays there for about two years. When inflation begins to blossom during the spring of 2021, they respond by doing precisely nothing. They presume that inflation is transitory. A synonym for transitory is fleeting. They think it’s purely supply chain driven, that the economy was coming out of its doldrums. People were becoming vaccinated. We had the surge in demand particularly for goods, but the supply chains had been closed to various degrees, of varying degrees. So supply was falling short of demand, that’s inflationary. But as supply chains healed, as they normalized, supply would rise up to meet demand, inflation would come back to its pre-pandemic 2%. Instead, what the Federal Reserve oversaw was the creation of a wage price spiral. So during the spring of 2021, prices take off.

Employees say, “My goodness, boss, look at this. Are you looking at the CPI data the way I am? Could I look at them all the time?” They actually never had before. But setting that aside, “Are you looking at these data? I need a raise. It’s getting very expensive to live out here.” Boss says, “No problem. The economy is come back very, very quickly at V-shaped recovery. I’ll just pass all my costs increases to my customers because in an inflation environment I can support higher profit margin. In fact, corporate profits are positively correlated with inflation.” Well, of course, we get another burst of inflation and now the employee comes back knocking on the door, “Boss, I need another raise.” “Okay.” So now you’re in the midst of a wage price spiral. The Federal Reserve to get inflation back to this 2% target has to break that wage price spiral, so that since March 16th of last year, they’ve been raising interest rates. First they dip their toe into the inflation fighting water, 0.25%; then 0.5% the next meeting; then four consecutive meetings of 0.75%, back to 0.5%; then 0.25%, 0.25% again.

Then on May 3rd, meaning a month ago, 0.25%. So what was a 0.25% rate of interest is now 5.25%. Now, most pundits and analysts and so on agree that the Federal Reserve will pause in June. So they meet June 13th, June 14th, and they will not raise rates this month, and we’ll get into why that is. But interest rates are much, much higher. Now, ostensibly, they’re not trying to destroy the economy, they’re trying to engineer a soft landing. What does that mean? They want to frustrate borrowing and spending, borrowing and investment by driving up the cost of capital, bringing demand down into conformity with supply to ring out excess inflation. But the question becomes, is it possible at this point to engineer a soft landing or is that mission impossible? That’s really the question here. Now the good news is that they still have some room to maneuver. The economy is not in recession right now. Let me talk a little about how they conceive of the issue.

These two quotes come from our Federal Reserve Chairman, Jerome Powell, who back in August of 2022 says the following quote, “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they’ll also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.” For them, the definition of price stability is 2% inflation. So since they started finding inflation, we could make the argument that they started too late. But since that battle has begun, they’ve been very aggressive in their language and their actions, words and deeds. They’ve talked about raising interest rates, talked about fighting off inflation, and they, in fact, have raised interest rates quite significantly. In November of 2022, the Federal Reserve Chairman says the following quote, “Let me say this, it is very premature to be thinking about pausing,” even thinking about it. “So people, when they hear lags, they think about a pause.” What does that mean?

So when the Federal Reserve raises interest rates, whether on March 16, 2022 or May 3, 2023, the complete effect of that on the economy does not show up immediately. It takes a while to work through the economy. It could be as much as 18 to 24 months before an interest rate increase has its complete effect on the economy, which means even the March 22nd of … sorry, the March 16th of 2022 rate increase has not as had its complete effect on the economy, let alone let’s say, the four rate increases of 0.75% a piece. So there’s all these lag effects built up in the economy. So many stakeholders, including investors would say to the Federal Reserve, “Slow your roll. What are you doing here? You’ve raised rates at the fastest pace in more than four decades. Let these lag effects wash through the economy. It’ll bring growth down, bring inflation back down to 2%, your target, your mandate. You don’t keep raising rates because you’re going to drive the economy unnecessarily into a recession,” ’cause joinder to that comes from the Federal Reserve Chairman in the form of this third sentence, it’s very premature.

So in the span of three sentences, our Federal Reserve Chairman says the words very premature twice, not especially eloquent, clearly not written by ChatGPT, but it makes the point, “It’s very premature, in my view, to think about or to be talking about pausing our rate hike.” Now that was said seven months ago, it’s now June of 2023. It is true that they’re pausing in June because I think they want to see what these lag effects look like. They want to take a pause and, then they meet again in July and the bond market is suggesting that maybe they pause in June but start raising rates again in July, so we will see. But the war inflation is not yet done. But again, the good news is there is some underlying lingering momentum in the economy. So as an example, the broadest measure of U.S. economic progress is growth in gross domestic product, quarterly data, annualized rates of growth.

Now if you look at the left-hand side of the slide here, you can see the undoing of the economy during the first half of 2020, including that -29.9% performance through the second quarter of 2020. Then the V-shaped recovery, 35.3% during the third quarter of 2020. Several ensuing quarters of high single-digit rates of growth in an economy accustomed to growing 1 1/2 to 3% per annum, true. During the first half of 2022, America sustains a setback, two consecutive quarters of negative real GDP growth. The economy grew in nominal terms, but once you adjust it for inflation, it turns negative, satisfying a technical definition of recession, but then the third quarter, bounces back, 3.2%, 2.6% to conclude last year, the fourth quarter of ’22. During the first quarter of 2023, the U.S. economy grows 1.3%, which sounds pretty weak and it was, but misleading because a lot of that was about inventory decumulation, which really pushes the gross product estimates around.

But consumer spending was still pretty strong during that first quarter, consumer spending growing about 3.8% annualized pace during the quarter. Now the Atlanta Federal Reserve maintains a product known as GDPNow, which estimates current quarter gross domestic product, and that estimate right now sits at 2.0% for the current quarter. None of these are indicia of a recession. Indeed, they’re certain parts of the economy that have been especially strong, including as it turns out, the consumer. Here is U.S. retail sales, and these are monthly data, stretching to April of 2023. You can see the consumer has been on fire and spending massively. Ah, it is true that in November and December of last year, retail sales slipped. So retails came into 2023 with plentiful inventory. They discarded that merchandise aggressively right after the holiday shopping season. Sales took off in January, but then fell again in February and March, more discounting, sales come back a bit in April. We’ll come back to this. But in general, the consumer has been spending pretty aggressively, wouldn’t you say? Let me look at this from a circle perspective.

The consumer has tended to stare inflation right in the eyes and spent right through it, and I’ll give you an example. I mentioned that transportation services has been a source of significant inflation in recent years. Airfares during a recent 12-month period rose 17.7%. Now, I’ve been told by the folks at CJM, you’re speaking to a group of very successful people; not only our own staff members, but people who are with us as clients. Because they’re successful people, Anirban, when they board an airplane, they tend to be isle or window people. That’s who you are. You’re successful people, so you’re isle and window people, that’s who you are. When you get into your isle or window seat, there’s only one thing you’re hoping you’re praying for, and it is not the safety of the flight. It is not that because you presume the safety of the flight. That’s incidental.

No, the only thing you’re hoping for in that moment of that kind of history is an empty middle seat, and that’s all you want. That’s all you care about. You don’t have to feel embarrassed by that. Wanting a empty middle seat does not make you a bad person. It doesn’t make you a good person. It doesn’t make you a bad person, but the middle seat has been full, ’cause the consumer has been spending. You can see that in the form of lengthy security lines, so on and so forth. So the consumer has been spending and yes, supported by stimulus payments and accumulated savings during the pandemic. They didn’t take vacations then, so they had more money later on, all that, but also supported by a very strong labor market. This is net change in U.S. jobs, monthly data.

We’ve been adding jobs there since December of 2020, a month during which it was COVID intensive as it turns out, and also, pre-vaccination. We just got the data for May. In May, America has 339,000 jobs. The unemployment rate is 3.7%, and I will give you a forecast, my forecast later in this presentation. But I got to tell you, the economy has not worked out the way I would’ve expected in many cases. I’ll give you an example. If somebody had told me back in February of 2022, “Anirban, here what’s going to happen. On February 24th, the Russians are going to make a move on the Ukrainians. Natural gas and oil prices will skyrockets along with fertilizer prices, cooking oil, those kinds of prices. Then the next month, the Federal Reserve will start raising rates at the fastest pace in more than four decades, what do you think is going to happen with unemployment, Anirban?” Now at that time, March of 2022, the unemployment rate was 3.6%. I’m skeptical that I would’ve said, “It’s going to rise maybe to 3.7%,” but that’s what’s happened.

The economy has been incredibly resilient in the face of war and higher interest rates, higher cost of capital and bank failures like Silicon Valley Bank, March 10th; Signature Bank, March 12th; the issues at First Republic Bank, which was taken up by J.P. Morgan. That was your 14th largest bank in the country. Silicon Valley Bank was 16th, so Signature Bank was 19. So lots of headwinds out there, lots of dog room. Here’s the thing, as many people as American employers have collectively hired, they want to hire even more. According to the JOLTS, the job openings and labor turnover survey in April, 10.1 million available unfilled jobs in America, about 1.7 job openings in this country for every unemployed American. America’s still very much the land of opportunity. You want a job in America, there is one waiting for you. In fact, there are two. Well, that’s inflationary. You got 3.7% rate of unemployment, 10.1 million available unfilled jobs, almost 400,000 in construction. As we try to rebuild the nation’s infrastructure, all of that’s inflationary, because people are scarce and that puts upper pressure on wages.

The problem here is not simply a cyclical one, it’s not simply the fact that we’ve come out of the pandemic so aggressively from an economic growth perspective, it’s a structural one. The labor force is not growing rapidly enough to accommodate the needs, wants, aspirations of the people of this country, and the real problem here is, it’s men. Men are the problem. Some of the women that you ask might say, “Well, that’s a job proposition, sir. I’m only talking about the labor force dynamic. It’s not household chores or anything else.” So if you were to look at labor force participation rates in 1980 when music was good versus 2023, this is what you get. So you’re part of the labor force to be either working or looking for work. So I’m looking at the proportion of the eligible population that’s either working or looking for work, and then taking a delta between the proportion of 1980 versus 2023. So you look at the tabular data here, you see that top row there, which is also the bolded row?

To be part of the U.S. labor force, you have to be at least 16 years of age. In Canada, it’s 15, here it’s 16. So the labor force participation rate between 1980 and 2023 fell 1.2 percentage points, but it fell 9.4 percentage points among men, but rose 5.7 percentage points among women. So men jumped out of the labor force, women jumped in. Now you can break this down by age, 16 to 19 year olds -19.5 percentage points overall, -0.3 percentage points for men, -60 percentage points for women. What’s that about? That’s college. So you might remember in the 1970s, we lost a ton of manufacturing jobs in this country. The notion was that we were going to become an increasingly service sector-oriented economy, which proved to be true. To participate at the commanding heights of that economy, one would have to be quite gainfully educated, college degree, for instance, to become an engineer, a lawyer, a financial advisor, an economist, whatever it happens to be, an accountant, an actuary.

So if you’re in college, you’re less likely to offer your services to the labor force. 20-24 year olds, -5.6 percentage points overall, -13 percentage points for men, adds a one percentage point for women. What’s that about? Well, it could still be college, ’cause it probably takes most guys six to eight years to finish college. But then you look at 25 to 34 year olds, +3.6 percentage points overall, -6 percentage points for men, +12.6 percentage points, women, what are these young men doing? What are they up to? They’re neither working nor looking for work, and they’re 25 to 34 years of age. What are they doing? No one really knows cause everyone’s too scared to ask. But it probably involves a couch in a parent’s basement, maybe some video games, who knows? But not work at a construction job site or an Amazon facility or any other place. You might say, “Anirban, look, I’m pretty sure that CJM invited you to be an economist, to be unemotional, dispassionate, data-driven. You’re getting angry out there in computer labs. You’re getting pretty emotional.”

You might say to me, “Anirban, the idea of a 33-year-old American man sitting his parents’ basement playing video games while eating bologna and salami sandwiches that his parents made, maybe smoking some weed, that’s adorable.” I don’t disagree. I think that’s adorable. They’re less adorable when they’re 43. 35 to 44 year olds, +3.7 percentage points overall, -5 percentage points for men, +11.8 percentage points for women. So it is often said, by the way, that men make more than women, which is true as it turns out. Men make more than women still statistically speaking. But young men do not make more than young women. Young women are far more less to own a home than a young man. So this is part of the challenge here, particularly for industries that are male dominated like construction, 87% male, manufacturing, 70% male, ’cause it means more labor market tightness. It puts upward pressure on wages, that’s inflationary. Here’s the thing, this gives you some sense of how hot the economy remains. Even though American employers have hired so many people, and again, we’ve recovered fully along this dimension, they want to hire even more.

If you were to compare job totals for this nation in February of 2020, why that month? That’s the month when we shut down the economy versus May of 2023, last month virtual of data, America is up 3.7 million jobs. So we’ve recovered. The top segment here is professional business services, that’s your law firms, your accounting firms. Many white collar jobs are allocated into those segments. So it’s a very large part of the U.S. economy, which helps explain part of its privacy here, but also disproportionately, it offers the opportunity for people to work remotely, and that’s what many Americans want. They want to work remotely. A recent survey indicates that 68% of Americans, more than two in three want to work remotely, not at a job site. They don’t want to commute, they don’t want to be with their colleagues. They do not like their colleagues. A separate survey finds that 57% of Americans find their colleagues to be annoying because they overshare, meaning, “I asked you what you did this weekend. I did not intend for you to answer.”

They take credit for one another’s work, but the number one reason people find their colleagues to be annoying, they interrupt during meetings, which can happen on Zoom as it turns out, it typically does. Nonetheless, there is this general preference for remote work. At the bottom of the list, leisure and hospitality, that’s your hotel and restaurant worker. By and large, it’s the lowest wage segment of the economy, so often out competed for human capital along the dimension of compensation, but also as a general proposition, does not offer the opportunity for people to work remotely. Now, these labor shortages have been even greater in regions of the country that have been growing with particular pace. This employment growth from the 25 largest metropolitan areas in our country, February of 2020, again, the last month before we shut down the economy versus April of 2023, the last month, which are the sub-national data. Notice the primacy of the American South. We’ve got people on this call from all over the country, but notice the primacy of the American South.

Dallas, Tampa, San Antonio, Orlando, Charlotte, Phoenix, Orlando, Riverside, California, Houston, Miami, San Diego, that’s where the job growth has been fastest. That’s where the population growth has been, that’s where the job growth has been. Now Philadelphia sneaks into that left-hand column, but for the most part, the Northeast Corridor is in the right-hand column. You can see Washington and Baltimore, and several others from Washington to Baltimore here among the least dynamic economically in terms of job growth over the last three plus years. You can see New York or Boston also in the right-hand column along with the Midwest. So Chicago, Minneapolis, Detroit, St. Louis, in that right-hand column, slower growth. That’s not where the population growth has been as rapid, that’s not where the job growth has been as rapid. Now I find this slide to be interesting, but the next slide is far more important macroeconomically and from an investor perspective, same 25 major metropolitan areas. But instead of percentage job growth, it’s unemployment rates. Here’s the problem: these unemployment rates are too low.

You say, “Anirban, that’s crazy talk. We love low rates of unemployment. We love it when people graduate from an apprenticeship program, high school and college and can quickly secure opportunity. We love it when somebody loses job through no fault of their own, let’s say, and can quickly find replacement employment.” Yes, we view it as a sign of national economic strength, economic vigor, but it’s less positive when you’ve got 10.1 million available unfilled jobs and inflation is still raging across the countryside. So when the Federal Reserve looks at these data and says, “I can’t stand by this. I can’t allow this equilibrium to stand, because I’m seeing wage growth between 4 and 5% because the labor market is still too tight. There’s too much demand for workers, and to get back to 2% inflation, I might need maybe three to three-and-a-half percent wage growth, but I can’t deal with the wage growth now. Somebody has got to lose their job. This labor market has got to be loosened up.”

So when the Federal Reserve Chairman said back in August, “I’m going to cause some pain to households,” that’s what he’s talking about, and so the war inflation is not yet done. Interest rates are already high and could rise further, and that dynamic along with some other things we can talk about increases the risk of recession. Again, 1996, Jerry McGuire, I cried. I cried. I wept. I wept. Now before I come with the definition of a recession, let me define it for you. I had mentioned a moment ago that we sustained those two consecutive quarters of negative real GDP growth during 2022’s initial half satisfying a technical definition of recession, but not that definition of recession. This is my definition. “The National Bureau of Economic Resources Business Cycle Dating Committee is the official recession scorekeeper. They’re the arbiter of when recessions begin and if they occur at all.” Accordingly, they’re the ones that maintain a chronology of U.S. business cycles. So they’re the ones who told us in 2002 that the recession of 2001 began in March of 2001 and ended in November of that year.

Now, the traditional definition of a recession is, quote, “a significant decline, a significant decline in economic activity that spread across the economy and that lasts more than a few months.” That’s the recession that they declared in 2020 begins in February of 2020, ends in April of 2020, arguably not more than a few months. They declared it a recession [inaudible 00:32:32] because they can, they can do whatever they please. They sit in Cambridge, Massachusetts and they can do whatever they please. They are the definition of a recession. What’s more, there is no fixed rule about what indicators contributed information to NBER’s process or how they’re weighted in the termination of a recession. They can look at wherever they please they can. Now, as a practical matter, they look at employment, unemployment, gross domestic product, industrial production, retail sales, but they can look at whatever they please, stock market, whatever.

Because the government statistics NBER relies on are published at various lags, the NBER Committee cannot officially designate a recession until after it starts and often, not until it’s over. So for instance, we shut down the economy in March of 2020. So it was open in February, shut down in March. Clearly there was a recession, but they could not declare that until the confirming data arrived. Okay. So again, we’re not in a recession now. How could you be with consumers still spending and with so many jobs being created? But there are some signs. So for instance, for much of this pandemic recovery period, the mantra among many CEOs has been, “Let me case demand. Clients are coming back very, very quickly. There’s lots of unmet demand out there. If I can meet that demand, I hire the employees, I lease the warehouse space, I purchase the equipment and I meet that demand, I gain that market share. In an inflation environment, I can monetize that market share. I can drive profits higher. I’ve got more room to push margins higher in an inflation environment.”

But more recently, there seems to be more emphasis on cost containment. This comes from the U.S. gross domestic product data, non-residential fixed investment in equipment. You can see for the last two quarters, this investment has been in decline. Now that could be in part because of the supply chain issues. They’re still lingering. So I spoke to a group of mechanical contractors recently out of Washington D.C. and they told me their lead time to acquire switch gear being for electrical equipment was something like 50, 60, 70 weeks, in many cases; in some cases, 100 weeks, two years. They told me their lead time for generators are similar to that, so there’s that. But I think this is because more and more businesses, more and more CEOs are deciding, “I need to think about my cost structure. I took on a lot of costs during this pandemic recovery period, maybe I hired too many people. Maybe I took on too much capital expense.”

According to the November 2022 PwC survey of U.S. executives, 26% of firms are planning to reduce the number of full-time employees over the next 12 to 18 months. Now you can see from the employment data, there’s still lot of hiring, but the plans are in place to maybe let some people go. In August of 2022, 50% of firms said they already had or had a plan in place to reduce overall headcount. Four to five executives surveyed by PwC in November of 2022, said a recession was coming within the next six months. They’re wrong about that. That was said seven months ago. A recession did not come, but again, they’re nervous. They’re planning maybe for layoffs. In fact, some firms have already, of course, moved forward with the layoffs. There’s some noteworthy layoffs in 2022, 2023. At the top of this here is Amazon. The CEO, there is Andy Jassy. Andy Jassy has announced two layoffs recently, the most recent being 9,000 jobs, totaling 27,000 jobs.

But here’s the thing, Andy Jassy did one other thing at least. He said to his white collared workforce, “You’ve got to come into the office three days a week.” “Yeah, that’s right. You’ve got to come into the office three days in one week.” Are we barbarians? Is this how we treat people? Three days in the office? I can’t imagine. Now my guess is that was done to foment collaboration, innovation, supervision, but also try to get some people to quit and some people have quit over that policy. Meta, the CEO there, of course, is Mark Zuckerberg. He announced a massive layoff. But during a recent earnings call, he said the words efficient or efficiency 41 times. He’s declared this the year of efficiency at Meta. So many CEOs watched as his share price was 100% so far this year, at least until the last few days. Looking at Meta and saying, “You know what? If that’s how you drive up your share price by cutting costs, by focusing on efficiency, maybe I shouldn’t be chasing demand, maybe I should cut costs.”

This shifting attitude in an interest rate-driven environment is particularly impactful on interest rate sensitive segments like real estate. So let’s talk a little about real estate. So this is from 1992, A Few Good Men playing the part of Lieutenant Daniel Kafee, a young military attorney. So I begin this story talking about interest rates. I think that’s the right place to begin. That’s what’s really shifted over the past year, the trajectory of the economy over the past year, but also going forward. So let me show you two interest rates of interest. The 15-year fixed mortgage rate here is in green and the 30-year fixed mortgage rate here is in gold. Green and gold, of course, The Color of Money, which was the 1986 Tom Cruise film also starring Paul Newman playing the part of Fast Eddie Felson. In any case, in January of 2022, the average 30-year fixed mortgage rate according to Freddie Mac was 3.22%, according to the most recent weekly data, 6.79%.

Now, some of you might say to me, “Anirban, a 6.79% mortgage rate on a 30-year fixed is not a big deal. My first mortgage rate was 18%. My first mortgage rate was 15%.” I’ve had people come up to me after presentations bragging about the fact that they used to pay 15% interest. I am not impressed, but it is an interesting history, and for those folks, 6.79% would not seem especially onerous, however, to millennials and generation Z, preposterous. That’s who’s really subtracted themselves from the would be buyer market, is that first-time buyer or the first-time move up buyer, the more interest rate sensitive buyers. Now as I move toward the tail end of this presentation, I want to show you a number of leading economic indicators because I want to pivot from a discussion of what’s been going on to the discussion of what’s likely to happen going forward. Now the whole purchasing process often begins with a mortgage application.

So unless you’re a private equity firm or a quite well-heeled American household, people typically have to borrow money to purchase a home. This is your U.S. Mortgage Loan Applications Composite Index for the Mortgage Bank Association, the measure of loan applications. It is down this index by 80% since its 2021 peak. Again, who has subtracted themselves larger from that marketplace? It’s that first-time buyer, that millennial or generation Z buyer. Generation Z is not quite old enough to be in prime home-buying age, but they’re getting there. Within five years they will be there. But so it tells us the story, and predictably with high reward rates, we’ve seen some price adjustments. So this is the S&P Case-Shiller U.S. National Home Price Index. You can see after a period of phenomenal growth in home prices, you saw some give back, except that during the most recent month, home prices bounced a bit higher. I’ve been amazed by this.

I would not have predicted the kind of strength here. Now, true, the inventory of unsold homes is very scant, so people are competing over very few homes. By and large, all the entry level or first-time buyer homes have been bought. So what’s left is an inventory of quite pricey housing as it turns out. You see a lot of cash deals out there, and you still see some bidding wars. Now again, there was a period during which home prices were in decline, particularly in certain markets. So I can break this down by metropolitan area. This is the S&P Case-Shiller Home Price Index by Metropolitan Area, total month percentage changed. You can see some technology-intensive markets like Seattle and San Francisco, also San Diego giving back some home price gains over the last 12 months through March. But then you look at the bottom there, Miami, Tampa, Charlotte, Atlanta, again, the American South with still some price gains.

You would not know the interest rates have increased in Miami when there’s so much cash pouring into that market from Russia, from Latin America, so on and so forth. So property has been very expensive there as you know, getting more expensive. But here’s the thing, so you see a mix here, but in the next slide, you will not see a mix. The next slide is just the one-month percentage change. This is March of 2023 itself, so here you go. The 0% line is left-hand access. Everything is gaining in terms of home price again. You could make the argument, the home market or a single-family housing market has already bottomed out. It’s already had its recession. There’s similar appetite to buy homes. I think one of the things that’s happening here is that people are always looking for diversification opportunities. They’re in equities, they’re in bonds, of course. S&P is trading right now at 4265.11. It’s down about 18.59 points so far today, but it’s been strong. It’s been a strong performance.

So people say, “Oh, I’ve got some equity market gains. We’ll see where the equity markets go, but to diversify my portfolio, maybe I should buy a property.” So you see a lot of these all-cash deals and the homes at the upper end of the spectrum due to trade at handsome prices. Now I want to show you that leading indicator, but this one relates more to construction of homes. This is U.S. residential building permits. That’s a leading indicator because if you’re a builder, you’ve got to pull a permit before you build. You see the yellow line there? That single-family building permits. That has been down recently until, again, a recent bounce back, ’cause home builders see, “Oh, my goodness, housing market’s holding up better than we thought. There’s still some unmet demand out there.” Permits have been actually pushing higher very recently. So again, I’ve been surprised by that.

I would’ve thought that given the interest rates have risen so much and that they’re set to rise perhaps even further, we’ll see, that you’d see more permanent downward pressure on the single family market. Actually, the market we’ve seeing more weakness recently has been the multifamily market if you look at that downward trajectory. That includes your apartment construction. I would’ve thought this segment would’ve been stronger because you have to have a place to live. All things being equal, high mortgage rates are good for the apartment rental market. If you can’t buy a home because of affordability issues ’cause of higher mortgage rates or lack of inventory or high prices, generally, you’re going to rent. Well, if you’re a millennial for instance, or if you’re generation Z, you’re going to rent. But here’s the thing that’s happening. I think that this is really driven by the lack of access to capital. Among many developers. There’s developers that pull permits.

What they’re finding is that bankers in many cases are more reluctant to expose themselves to real estate fundamentals, dynamics. We’ve got 1 1/2 trillion dollars in commercial real estate related debt to refinance between now in the end of 2025, the so-called debt maturity wall. Who’s going to refinance that debt? Who’s going to finance more apartment buildings? Because bankers at least are risk averse right now given what’s happened at Silicon Valley Bank, Signature Bank, First Republic, Credit Suisse, Deutsche Bank, more recently, PAC West and Western Alliance. So there’s still these banking issues out there. Now this next measure pertains more to commercial real estate. It is the Architecture Billings Index. It’s a reflection on how busy architects are. You see that 50-yard line running west, east across that slide? Any reading above 50 means that architects are collectively busier now than they were the previous month.

You can see that during much of the pandemic recovery period, architects are getting busier and busier and busier. Well, of course, it is. The economy was coming back very strong and people were looking for income. You might remember that for a while there interest rates were very low. So it’s difficult to generate interest income. Bonds were not yielding. The last year fixed income got its last name back, but prior to that, people were looking for other sources of income. Real estate is one of them because real estate generates rents and hotel daily room charges, that kind of thing. That kept architects busy because property is being purchased and then repositioned is the marketplace, design builds. But six of the past seven months, the architects have be getting less busy. Again, I think there’s a big issue in commercial real estate that last year, the U.S. economy grew 2.1%. We added hundreds of thousands of jobs in white collar segments, and yet, the U.S. office vacancy rate rose last year as remote work stays pervasive.

This is misleading, this 12.5%, there’s a lot more office space vacant than that, but it’s not considered vacant statistically because it’s still leased. As these lease renewals come up, you’re going to see a push higher. There’s another segment of commercial that’s in trouble, at least one. That’s your malls, your shopping malls. This is vacancy and shopping malls. Yeah, consumers have been spending, but increasingly online is getting market share. So something like one in four malls is set to fail within the next three to five years. We saw a lot of retail bankruptcy during the pandemic, so Brooks Brothers, Francesca’s, Pier 1 Imports, GNC all go bankrupt. With that comes lots of foreclosures and many of those operated in malls. So watch out for commercial real estate. It is one of the real drags on the economy going forward because these properties are simply not cash flow sufficiently and they’ve got a lot of debts against them and somebody holds that paper. Okay, enough of that. Let’s go to the forecast now and then we can open for Q&A.

Just give me about three or four more minutes here and then we can go to Q&A. So it’s a 2014 film science fiction, not my favorite Tom Cruise film in the interest of full disclosure, but an amazing transition slide, so it makes the cut. Now, you cannot have a recession unless the consumer participates, because they’re about 70% of aggregate demand. So as long as the consumer is spending, no recession by and large. So one of the things that we do is we monitor their psychology. Are they happy? ‘Cause the theory is that if they’re happy, they’re more likely to spend. So this is the University of Michigan’s Index of Consumer Sentiment. Where is the consumer right now psychologically? They’re miserable. What has them so miserable more than any other factor is inflation. They’re roughly where they were in 2008 psychologically in the midst of the global financial crisis. They’re angry about it. People ask me all the time, “Anirban, why do people drive angry?” ‘Cause they’re angry, generally speaking, and they’re not the only ones to become quite pessimistic.

So I talked about the PwC survey data, and that largely relates to large corporate CEOs. You could see the consumer is downcast, downbeat, small businesses too. This is from the National Federation Independent Businesses Survey Index or Small Business Optimism, questioned small business America, “Is it a good time to expand your business over the next three months?” In April, only 3% said yes, akin to where we were in ’08 or ’09. They would like to expand their business, mind you. They live for that. But they can’t find workers, can’t retain workers, can’t afford workers, can’t afford their healthcare premium. They suffer equipment delays and shortages. Their materials prices have gone up. So concrete prices, as an example, are 13% over the past year. So is it a good time to expand? Many of them would say no. Now these are considered soft data, the psychological data, survey data. This is a bit harder. This is the U.S. Leading Economic Index on the Conference Board. It’s 10 that the indicators all bundled.

The one indicator that I’m graphing for you here, actually I’ll say a niblet from our staff graphed here. Now this is an index that predicted the 2001 economic downturn, predicted ’07, ’08, ’09. Now it’s telling us tougher times are in front of us. The economy has been stubbornly resilient so far, but there’s a lot of lag effects in the economy. There’s tightening credit conditions. Consumers have taken a lot of debt. They’re not happy with life as a general proposition. So these measures at least taken collectively suggest to me that a recession is quite likely, you’ve got an inventory cycle working against us. This is business inventories. So look at the slice in the middle there. That’s the green slice. That’s retail inventories. I had mentioned that retail sales actually fell in November and December, then again in February, March. There’s been lots of discounting. Maybe you heard some negative things from Home Depot and Target lately, again, the middle market.

So when retailers see that after discount merchandise to move it, they order less from the merchant wholesale. That’s your distributors or middlemen and women. Their inventories have risen. You can see that. When they see their inventories rise, they order less from the manufacturers, that light blue down below, manufacturing inventories are up. If you look at the Purchasing Managers’ Index, which is from the Institute for Supply Management, it’s one of the federal leading indicators for our economists, the manufacturing indicator is sitting at 46.9. Well, that’s below 50. That means manufacturing is now in retrenchment. So again, all of these measures suggest a recession is quite likely. This one screams that a recession is coming. This is your U.S. Treasury Yields. It’s your yield curve. Again, two interest rates of interest, the yield on the one-year Treasury is in gold. The yield on the 10-year Treasury is in green. So typically, you’d expect the interest rate or yield on a 10-year instrument to be above that on a one-year Treasury. If I want to buy a U.S. Treasury thereby, lending to the federal government for 10 years, I’m not going to see my principle for a decade. I want to demand more interest in the interim per annum to reward me for my patience. Conversely, if I buy a one-year U.S. Treasury, I want to see my principal in 12 months risk-free, now that the ceiling is behind us, and so I don’t need to be so richly compensated. But occasionally, the bond market goes topsy-curvy, upside down, inside out, Diana Ross. The gold line, the yield on the one-year goes above the green line, the yield on the 10 year. These gray shaded areas are periods of a recession dating back several decades.

So where do you see the gold line go above the green line, this yield curve inversion? Just before the 1970 recession, before ’73, ’74, ’75, before 1980, before ’81, ’82, before 1990, 9 91 before 2001, before ’07, ’08, ’09, not so much before 2020 that was caused by something else. But now we have massive inversion of the yield curve as it got up here, about 1.4 percentage points in terms of that inversion. It’s screaming recession. I think a recession is coming, and maybe you can’t handle the truth. Now you might say, “Anirban, a couple of things. First of all, it’s not the truth. It’s your forecast. Now you just said that the economy has not worked out the way you expected.” Fair enough. This is not about you buying into my forecast, not at all. I’m agnostic with respect to that. My goal today has been to do some issue spotting on your behalf, looking at some of the economic risks out there so you can think about your portfolio and other aspects of your economic life.

You can refine your own outlook for economy. You might also point out to me, “That wasn’t said by Tom Cruise, sir. That was said by Jack Nicholson in 1992, A Few Good Men.” Fair enough. Jack Nicholson played the part of Colonel Nathan Jessup and he’s on the stand. He is being grilled by young military attorney, Lieutenant Daniel Kaffe, who eventually asked him a question that elicits this response, which is an admission of guilt. That young military attorney, Lieutenant Daniel Kafee, well, that role was played by one young and quite handsome Tom Cruise. I think the economy gets worse before it gets better. Now you might see a bit of a bounce back in the second quarter of gross investment product because again, the first quarter was weakened by inventory deaccumulation. You might see some inventory rebuilt during the summer spending months, and again, we’re the last month of that, of the quarter as it turns out.

But then I think the weakness comes later in the year. In fact, I think the recession begins September 5th, thanks to omnibus, check up. At no point have you demonstrated enough insight to forecast that with that level of specificity. I don’t disagree, but what is September 5th? It’s day after Labor Day, and I think that’s what it really catches up to us, that consumers will continue to spend and travel during the summer months. But come Labor Day, after that weekend, they;; look at their credit card balances. Some have to start paying back their student loans. That’s when recession begins, and I think we’re going to see more layoff announcements between now and then. The global economy is weakening, which is reinforcing our economic weakness.

Our economy is weakening, inventory cycle, so on. Bordering costs are higher, that’s incontrovertible and excess inflation persists. Some segments seem to hold up better than others include public construction, grocery stores at multifamily housing, at least from the perspective of leasing. We got to eat, a lot of money lined up for infrastructure, need a place to live. At some point the Federal Reserve will stop raising rates and as importantly, will start lowering them. Now the bond market is saying different things, but now the bond market seems to be agreeing with the notion that they won’t start reducing rates until 2024, though, we’ll see. That will spawn the next growth cycle for America. But until then, I think recession conditions are set to prevail at somewhere over the next 12 months. I think it could a bit sooner than that. Of course, again, I could be wrong. I am an economist. With that, thank you very much to CJM for the opportunity to be with all of you today. I’ll stop sharing and we’ll turn it over to Q&A.

Parker Trasborg:

Thank you. That was excellent. We did have a question come through, “How does wealth disparity in society affect the various charts that you presented? Is there a large percentage of the population that doesn’t have dispensable income to participate as they may have been able to?”

Anirban Basu:

Yeah, as I pointed out, inflation is particularly high in those categories that would most impact the people in the lowest quintile of income, food prices for instance, and also shelter prices. Yes, we have an incredible number of Americans who depend exclusively on, for instance, Social Security for their income. About 40% of people are seeing Social Security, depend on that exclusively for their retirement income. It’s not meant to be that, it’s meant to be an income supplement, but again, 40% depend exclusively on that for their income. Obviously., A lot of the savings generated during the pandemic from stimulus payments and foregone vacations, so on and so on, that money’s been spent down. So during the peak, as it turns out, we had about 2.3 trillion in excess savings at the household level.

So again, foregone vacations and other experiences and stimulus payments, all of that, 2.3 trillion in excess savings is what above and beyond what would’ve transpired but for the pandemic. About 1.3 trillion of that has been spent already, so we’re down to a trillion dollars in excess savings. But a lot of that trillion dollars is held by people in the highest quintile of income. So people at the lowest quintiles of income have spent through those savings. The credit card balances are rising. Many of them now have to restart paying student loans. You put all that together, you’re going to see in that lowest quintiles of income, let’s say the lowest two quintiles of income, a lot of pressure, especially if I’m right, that the labor markets softens for the months ahead.

Parker Trasborg:

Thank you. Did have a question about the debt ceiling, which they did wrap up on Saturday, “What is the impact on the economy here in the U.S. and relations with other world countries if they just keep with the political infighting as they renegotiate this every couple of years?

Anirban Basu:

Yeah, I don’t think it helps America. It said that markets hate uncertainty, and this is a source of uncertainty, but one has to say that the markets is not seen particularly roiled by this. Neither the bond markets or nor the equity markets seem to take this very seriously. The equity markets were rising for the most part as they reached that agreement, there was the presumption they’re going to reach that agreement. Once they reached the agreement, the market gave back a little, you might know, because you buy the rumor you sell on the news.

So the presumption was they were going to make an agreement, it was catastrophic. They weren’t going to do it. There’s a selection year next year and incumbents want to be reelected. If you want to be reelected, you want to create an economic crisis. But in January 2025, apparently, we’re going to revisit this, and we’ll see what that looks like. But by that point, we have a new president and all those kinds of things, so very different dynamics. Actually, we might have the same president still be reelected. Let me be clear about that. But it’ll be a new presidential administration, one way or the other.

Parker Trasborg:

Yes. A question around cryptocurrency with the Fed and potentially banks looking at issuing their own currencies, should we be concerned about that at all?

Anirban Basu:

Oh, I don’t think we should be concerned necessarily unless we’re owners of Bitcoin or something like that because here’s the thing. I’m often told by often young men, like 27 years old, who are the leading advocates of Bitcoin. “It’s digital gold, man.” They’ll say, “It’s digital gold, man.” I’m like, “Don’t call me, man.” But then I’m also like, “Why do you say that?” They say, “Well, it’s the currency of the internet.” I said, “Well, my credit card works on the internet. My PayPal works on the internet. What do I need digital currency for or cryptocurrency?” So what is the difference between cryptocurrency and digital currency? Digital currency comes from governments. It’s government backed, government issued. So the Treasury Department has been researching for a couple of years now their own U.S. digital currency, which could actually compete with Bitcoin and Ethereum and Litecoin and Ripple and so on and so forth.

So I think that as you see these governments put forth these digital currencies, that’s going to create more competition for Bitcoin and so on and so forth. So with the SEC coming down on Coinbase and other companies, all this regulatory uncertainty and with more competition coming from governance in this space, that’s why I’m concerned about the long-term value of Bitcoin. Look, Bitcoin is 27,000, 26,000, whatever it’s today. But yeah, anyway, I’m not worried about it, but I would be thinking about this if I had made a lot of money in cryptocurrencies about whether I would continue to.

Parker Trasborg:

A question around the recession that’s going to start on September 5th, “How long do you think it will last, and how deep do you think it will be?”

Anirban Basu:

Yeah, I think it’ll be actually a quite shallow recession. I’ll tell you why. It’s because we’ve already had these rolling recessions. As I mentioned a little bit about this, you’ve seen some retrenchment in the technology sector. Big tech has already announced some serious layoffs. You’ve seen the housing market maybe even bottom out already. So some of the imbalances that have been in the economy have already been worked out even before we entered an economy-wide recession. So I think the recession is going to be quite mild, and I think the Federal Reserve is going to come forth with interest rate cuts in 2024, and so the economy is going to weaken for a time, but I don’t think it’s going to be a very lengthy time.

Parker Trasborg:

I have one last question, and we’ll end hopefully, on a positive note, “What are the top factors that are actually keeping the economy steady right now?” Which you did cover a little bit throughout the presentation.

Anirban Basu:

I would say it’s lag effects. That’s what this has been about, Parker, lag effects. That’s why it’s not very interesting. But you’ve had all these things take place in recent years. So for instance, you’ve had the interest rate increases, but before that, you had interest rate decreases. Stimulus has taken some time to work through the economy. You had all that fiscal stimulus, whether under the Trump or Biden Administration, American Rescue Plan Act, signed by President Biden, March 11th of 2021, the Infrastructure Investment and Jobs Act signed by him on November 15th of 2021. Before that, it was the CARES Act signed by Donald Trump, March 27th of 2020, a $2.2 trillion package, he signed the Appropriations Act, signed by him on December 27th of 2020, $960 billion in stimulus.

So this stimulus is still working its way through the economy along with all that previous marketing stimulus. But now what you’re seeing is the stimulus is starting to go away. The fiscal stimulus is starting to wane in its terms of its impact on the economy. Now, of course, more recently, we’ve had interest rate increases. You’ve got all those negative lag effects now built into the economy. That’s why I think the economy gets worse before it gets better. That’s why I’m predicting a recession, and maybe it’s not September 5th. It could be maybe the 6th or the 7th.

Parker Trasborg:

Okay. Thank you. That actually wraps up all the time we have for today. I really appreciate your time, Dr. Basu, and the insight and the entertaining presentation for today. At CJM, we have a big focus on education and just awareness of what’s going on, and hopefully, today’s presentation helped fulfill that, our goal there and appreciate everyone sitting with us as we try a new format here on Zoom versus an in-person meeting as well. Again, that’s all the time for today. Thank you all so much for your time for joining us, and feel free to reach out if you’ve got any feedback or any questions that we didn’t get answered for you today that we can maybe answer sometime in the future. That concludes the presentation, and we will see you all sometime soon. Thank you.

Jessica Ness:

Thank you.