Austan Goolsbee on How This Cycle Turned Out To Be So Different

Tracy Alloway (0:03)

Bloomberg Audio Studios, podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, how was your deep dish pizza?

Joe Weisenthal (0:29)

It was so good. You know, I actually don't know if I had ever really had a proper Chicago deep dish pizza before, but I went to this place, I think it was called Pequod's Pizza, yeah, Pequod's, and they sort of burned the crust a little bit, which I really like. Highly recommended, seemed pretty legit, as far as I could tell.

Tracy Alloway (0:50)

You definitely did the right thing, because I just went back to the airport to hop on a flight, and I got to say, O'Hare is kind of even worse than I remember it. But anyway, in case you haven't figured it out yet, we both just got back from Chicago, where we interviewed the Chicago Fed President, Austan Goolsbee.

Joe Weisenthal (1:08)

That's right. First of all, Chicago is so nice this time of year. I love visiting Chicago.

We could have talked to Austan over Zoom or something, I guess, but it was great to actually go there, go to the Chicago Fed headquarters and talk to the President of the Chicago Fed. And what I have to say is, I think, an extremely interesting moment for macro right now.

Tracy Alloway (1:28)

Oh, it is so interesting. I know people overuse the term turning points, but I really feel like this is a very specific moment in time where we thought the labor market was weakening, the Fed cut by 50 basis points, and then we had that blowout jobs report. And I have to say, we recorded this interview with Austin on Wednesday, October 9th, which was the day before the latest CPI figure came out. Also, we recorded it right when the FOMC minutes came out. So not the best planning in terms of timing on our part, but since then, we've had CPI come in ever so slightly hotter than expected as well.

Joe Weisenthal (2:13)

Yes, that's right. So as you mentioned, we recorded this Wednesday. You're listening to this presumably on a Friday. But even with the fact that we couldn't talk about CPI, I think there's really two things that make this moment interesting. And it's always interesting because we're never, we live in a world of incomplete information and uncertainty. But the two things are really, and Austan talked about this in our interview, the Fed has changed focus, right? For a couple of years, it was about inflation and getting it down, and now the risks are balanced. So that's a key thing that happened. And I would say that Chairman Powell's speech at Jackson Hole in August officially marked that moment of the pivot starting there. And then the other thing is like, okay, maybe there's this pivot, but things right now are still really uncertain. And we really don't know what's gonna happen. And you mentioned the hot inflation number and the strong jobs report and all this stuff. So we're at a moment where pivot meets new uncertainty.

Tracy Alloway (3:08)

Yes. And who better to explain some of that uncertainty than Austan. So why don't we go ahead and take a listen. Here's Austan Goolsbee from the Chicago Fed. Thank you so much for coming back on Odd Lots.

Austan Goolsbee (3:20)

welcome to Where the Magic Happens.

Tracy Alloway (3:22)

We are very excited to be in Chicago. I have to say, being in the Fed building, it's a gorgeous building, the architecture.

Austan Goolsbee (3:28)

Yeah, it's a landmark. It's great. It's over 100 years old.

Tracy Alloway (3:32)

I heard you were celebrating the 100-year anniversary this year, right?

Austan Goolsbee (3:36)

Last year, it was, yeah, last year.

Joe Weisenthal (3:39)

Also, we probably could have caught up with you via Zoom, but it's just such a great time to be in Chicago.

Austan Goolsbee (3:43)

Yeah, this is the moment.

Joe Weisenthal (3:46)

This is what all the hype is about.

Tracy Alloway (3:49)

It's actually warmer in Chicago right now than it is in New York, which is kind of surprising. Okay, speaking of stuff that's warmer, we had a pretty hot jobs report recently.

Austan Goolsbee (3:58)

Nice transition.

Tracy Alloway (3:59)

Yeah, thank you. I'm a professional. Okay, Blowout Jobs Report. What does that mean for you? Did it cause you to take pause, maybe think about that 50 basis point cut?

Austan Goolsbee (4:09)

Well, look, you know my thing is always, let's take the long arc and find the through line, not overreact to one number. It's 60 days before that, we got a disappointing number, and you had people going on publicly and saying by the time of the next Fed meeting, they need to have 150 basis point cut. Then we get a positive jobs number, and then we have a positive jobs number, and then people are saying, maybe we should raise. I don't fault the market. That's the market's business model. They got to react to every little Twitter and blip that happens. In my view, the Fed's not on a timetable like that. We got to take the broad view. So far, I think the broad view shows inflation come way down. The job market has cooled from overly hot to something like sustainable full employment, where we would like it to be. And if we could freeze it right there, that'd be a lovely picture. And so then the question is, can you freeze it there? Or is it gonna get worse? If we got multiple months that showed big positives, like what we just saw on the jobs number, that would alter my view, that would affect my view. But I don't think that, I think people can take that too far from one month.