AI, shutdowns and shadow banks

Robert Armstrong (0:06)

Pushkin.

Katie Martin (0:09)

We spend quite a bit of time on this show banging on about stuff that investors are not especially worried about when they probably should be. That arguably makes us miserable old farts, but whatever, I'm leaning in. So here's a few things you could potentially worry about if you want to be nice and miserable like us. One of them is the total dysfunction in the US government and the shutdown that's now underway.

Americans, if you're wondering, yes, this does make you look very silly. The other is artificial intelligence. It's getting hella bubblicious out there. And if you really want to worry about something kooky, then you can always have a look at shadow banks. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets economist in slightly nippy London. And I'm joined down the line from New York City by an essential worker who unlike hundreds of thousands of federal US employees is still coming to work. And knowing him as I do, you can bet your ass he's still getting paid. It's Robert Armstrong.

Robert Armstrong (1:16)

I think you just called me a grouchy old fart. Was that the word you used collectively to describe the two of us? That was a bit tough, Katie. It's a tough way to start the show.

Katie Martin (1:27)

Speaking of tough, I have received several inquiries after our last podcast, which we recorded when I was out in New York, checking that I was still alive after we went for a few little drinks last week when I was out there.

Robert Armstrong (1:41)

We did fine.

Katie Martin (1:43)

It was quite civilized. Right, yeah. I think we can be sensible grownups when we try.

Robert Armstrong (1:48)

Not like the murder in Madrid, as I think of it.

Katie Martin (1:53)

We'll never speak of it again.

Robert Armstrong (1:54)

Yeah.

Katie Martin (1:55)

So let's talk about-

Robert Armstrong (1:56)

What are we talking about first? What's first on the document?

Katie Martin (1:59)

First, we're talking about the shutdown.

Robert Armstrong (2:02)

Yes.

Katie Martin (2:02)

So actually, talking about it is a terrible idea because shutdowns can turn into open ups very quickly, and we can end up out of date. But YOLO, let's talk about it.

Robert Armstrong (2:15)

I mean, the most important thing for us is, weren't we supposed to get a jobs report Friday that we're not going to get now? I mean, that's a disaster.

Katie Martin (2:22)

So the jobs report for the uninitiated, the non-farms payrolls report, is like the sort of benchmark US employment report, comes out the first Friday of every month, come hell or high water. And this is like the number one data release that comes out of anywhere in the world, because it's such an important input for US monetary policy. So everyone watches payrolls. And this Friday, oh, terrible scenes, we're not going to get payrolls, because the Bureau of Labor Statistics is going to be out.

Robert Armstrong (2:52)

And it literally is the most important economic data point in the world. And it has been shut down by the shutdown. At a time when the labor market is the focus of all the attention of the market and the pundits, because the labor market has been weakening dramatically at a time when the rest of the economy doesn't seem to be weakening dramatically. So we're sort of trying to figure out, is something weird going on in the jobs market involving immigration. I mean, listeners to this podcast have heard us rattle on ad nauseam about this, but it's an especially important time to have new labor market data and we're not going to get it. So this is very bad.

Katie Martin (3:32)

It's extremely bad. But the shutdown generally, I think non-Americans kind of don't get it, but there's an annual process from what I understand where Congress has to agree on a budget. And if they can't agree, then until they can agree, a whole bunch of functions just get shut down. So like national parks are now unstaffed. Yeah.

Robert Armstrong (3:55)

And the Bureau of Labor Statistics, all of this stuff. And this kind of game of chicken that the two political parties play, almost always, like games of chicken between children on bicycles, almost always end with somebody turning away at the last second. It's a very good bet that that will happen this time. But sometimes these things do drag on.

Katie Martin (4:20)

Yeah.

Robert Armstrong (4:21)

I can't, what was the last time?

Katie Martin (4:23)

I think it was about seven years ago.