Austan Goolsbee on the 'Golden Path' to a Soft Landing

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

Tracy, how about that jolts report we just got?

Tracy Alloway (0:20)

How about them jolts?

Joe Weisenthal (0:22)

How about them jolts?

Tracy Alloway (0:23)

Yeah, a lot stronger than expected, but I think there's a lot of uncertainty around jolts from what I remember.

Joe Weisenthal (0:29)

Yeah, well, it's like, A, I mean, we're recording this October 3rd. These are August jolts, so, you know, we're already, I guess that's like two months ago.

I'm always sort of skeptical about job openings data. Like, what is it really measuring? But nonetheless, this is a measure, the number of job openings that there are that people have been paying attention to. It had been coming down, it's jumped back up. And then it just does raise this whole question of like, is the economy really sort of decelerating into a nice, smooth, soft landing, or are we still really hot?

Tracy Alloway (1:03)

Well, I know you were looking at jolts, but I've been watching the bond market today because the other big story in markets is of course the big bond sell-off. The 30-year treasury yield, now at the highest since 2007, I think something like 4.8%. That's pretty crazy. And there's a lot of discussion right now over what is driving that long end sell-off.

Is it the higher for longer stance that we saw from the Federal Reserve a couple weeks ago? Is it worries over supply? Could be anything really.

Joe Weisenthal (1:36)

Right, we don't really know. And again, the moves that we're seeing in rates, really like across the curve, but yet really at the long end, like they do not scream to me, like we're in for a soft landing, right?

They do not scream to me, inflation is about to come down back to target. The Fed is gonna cut sometime soon, and we're going to be back in like 2018, 2019, Goldilocks territory. Like we may get that, but it does not look like what the bond market is saying right now.

Tracy Alloway (2:06)

It screams uncertainty to me. Like if you look at the bond sell off and you look at what's going on with Joltz, it just seems like we are still in this period where even three years after the absolute depths of the pandemic, it feels like we're not quite sure how the economy is actually operating, what the impact of interest rates are, what's going on with inflation. It's come down, but we're not really sure if we can attribute that to the rate hikes or something else.

Joe Weisenthal (2:34)

You mentioned, by the way, the 30-year mortgages. They're coming on 8%. So regardless of whatever, talk about a real effect on rates.

And the effect on rates to the broader economy may be kind of ambiguous, but it's certainly showing up.

Tracy Alloway (2:47)

This is why I mentioned the 30-year yield, because this is the thing that mortgages are priced off of commercial paper, corporate debt. It is like a big benchmark for the wider economy.

Joe Weisenthal (2:58)

So I guess there's questions like, what's going on, and can we achieve that soft landing? Are still like huge questions that are on everyone's mind.

Tracy Alloway (3:06)

Absolutely.

Joe Weisenthal (3:07)

You know what I think is a better term than soft landing, by the way?

No. Golden path.

Tracy Alloway (3:14)

Golden path.

Joe Weisenthal (3:15)

The golden path.

I think, you know, soft landing is nice, but the golden path towards that sort of, you know, low unemployment, low inflation. And our guest today recently gave a speech on the prospects of can we achieve that golden path? Can we walk this golden path into the sort of economic nirvana that we all want to see?

Tracy Alloway (3:37)

I know you brought up the golden path just then, your new term, but I kind of read it as the, this time is different speech.

And it takes like, it's pretty brave to make a, this time is different speech. But on the other hand, if any time is gonna be different, it might actually be the period after the worst pandemic that we've seen in over a hundred years.

Joe Weisenthal (3:56)

Right, exactly. Well, rather than us speculating about whether we can achieve the soft landing or whether this time will be different or whether we can walk down this golden path, let's bring on to the podcast. I'm very excited. It's his first time on the show, but someone we've wanted to talk to forever. Austan Goolsbee, who is the relatively new president of the Chicago Fed.