Big Tech knocked it out of the park

**Sabri Benishur** (0:01)
The economy was accelerating before the worm from Marketplace. I'm Sabri Benishur in New York. The US economy grew faster in the first three months of this year, 2% annualized rate, a big bump from the 1.5% growth rate at the end of last year. Jeffrey Cleveland is here to talk about it. He's chief economist at Payton in Regal. Hi, Jeffrey.

**Jeffrey Cleveland** (0:22)
Good morning.

**Sabri Benishur** (0:23)
US economic growth bounced back in the first quarter. What's that telling us?

**Jeffrey Cleveland** (0:28)
Well, it's pretty amazing. We've got the highest gas prices in four years, you know, here in California, over $6 per gallon. The US consumer continues to spend.
But the other big, big part of the story, in my opinion, is the AI boom, business investment in that area, which is contributing a lot to growth in the first quarter.

**Sabri Benishur** (0:51)
So now factor in the war. What does that portend for future economic growth this year?

**Jeffrey Cleveland** (1:00)
Well, I would just say that the war broke out and the rise in gas prices really happened in the last month of the quarter. So I don't think we've yet to see the full effect. So perhaps that will show up in the second quarter.

**Sabri Benishur** (1:15)
Now, one part of GDP is, of course, trade. The trade deficit actually grew. And, you know, tariffs were supposed to solve the trade deficit, bring down the trade deficit. They have not. Why?

**Jeffrey Cleveland** (1:27)
Well, I mean, that was one of the purported reasons for the tariffs, among others. My short version of that story would just be that it's difficult to close a trade deficit. The reason we have a trade deficit is because we are importing more than we are exporting.
Really, in order to close the trade deficit, you would have to see consumption slow, which is not something we really want to see. So, to me, it's not surprising that even though it's a bit more expensive to import goods, we still depend mightily on imports for the functioning of the economy.

**Sabri Benishur** (2:04)
Jeffrey Cleveland, Chief Economist at Paiden and Regal. Thank you so much.

**Jeffrey Cleveland** (2:08)
Have a good day.

**Sabri Benishur** (2:10)
Kevin Warsh is poised to become the new chair of the Federal Reserve. Yesterday, the Senate Banking Committee voted to advance his nomination to the full Senate for a vote. Warsh will find some challenges waiting for him. Marketplace's Nancy Marshall Genzer reports.

**Nancy Marshall-Genzer** (2:23)
The Federal Open Market Committee, or FOMC, decided to leave interest rates unchanged at this week's meeting. But there were some unusual dissents. Three regional Fed bank presidents objected to wording in the statement the central bank issued after the meeting, which pointed toward future interest rate cuts. They think higher rates might be needed to keep inflation from getting out of hand. At yesterday's press conference, Chair Jerome Powell was asked if he'll be handing Kevin Warsh a divided Fed. Powell said there have always been vigorous debates.

**Jerome Powell** (2:53)
It's only natural that you have a range of views on the committee. People are going to see it different ways. They're going to have different risk tolerances and that kind of thing. If everybody agreed, that would be surprising.

**Nancy Marshall-Genzer** (3:04)
Powell's last day as Fed chair is May 15th, but he announced yesterday he'll be staying on as a member of the Fed Board of Governors. Powell had said he wouldn't leave the Fed until a Justice Department investigation of renovations to the Central Bank's headquarters was well and truly over, but he said he wouldn't try to be a shadow chair or undermine Warsh, adding that he thinks Warsh will be able to create consensus on the FOMC.

**Jerome Powell** (3:29)
That's what every Fed chair has to do. I think Kevin Warsh is actually quite well. He has the capabilities, skills to be very good at that, I would think.

**Nancy Marshall-Genzer** (3:38)
Warsh will need those skills. President Trump has made it clear he wants lower interest rates, but Warsh can't deliver that on his own. It would take a majority vote on that divided FOMC. I'm Nancy Marshall-Genser for Marketplace.

**SPEAKER_5** (4:09)
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