Lael Brainard on What Still Can Be Done to Lower Prices

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, new year, I think, so far in 2024, I do not feel any more clear or confident that I have some real deep sense of which way this economy is going.

Tracy Alloway (0:29)

It feels like there's a risk that everyone could be wrong just going in the other direction this time around. So as we've discussed multiple times at this point, feels like there's a lot more acceptance for the idea of a soft landing or the idea that inflation can come down without generating a big spike in unemployment.

Joe Weisenthal (0:48)

No, there's no question at the end of last year, like soft landing optimism really picked up, but you could like tell me any story right now and I would believe it. You could say, oh, financial conditions are easing quite a bit, the stock market's at all time high or close to all time high, rates are falling, the labor market is tight, wage growth just came in and higher than expectation, there's still upward risk of inflation. You could tell me, oh, U6 and various measures of the labor market actually weakened last month, maybe the economy is not as on solid footing as we thought or two months ago. Like any story you told me, I might believe you.

Tracy Alloway (1:27)

This is a symptom of being online too much and talking to people online too much. That's it. Yeah, and just being able to argue both sides of the story because you see it constantly. But I mean, I take the point. Like there is a lot more optimism out there right now than there was a year ago. But on the other hand, there is still this, I guess, lingering sense of unease or even angst that you see in some of the consumer measurements. Or again, to your point online, if you point out the jobs market is doing really great, you will have a bunch of people talking about revisions to payrolls and things like that.

Joe Weisenthal (2:02)

Yeah, and it's legitimate. Like some of the measures have gone down.

And so I genuinely, I find myself, and plus the crowd gets it wrong a lot. So it seems like we're attempting fate by believing too much in the soft landing story. But it really does feel to me like there are many moving parts to this economy. You mentioned some of the sentiment measures, but there's also the fact that even with the inflation improvement, housing is still incredibly expensive. And there's all kinds of frustrations around that. So I don't think we will ever reach the end where we could say, okay, we know what's going on in the economy right now. We're always just going to sort of be searching for more threads to follow.

Tracy Alloway (2:41)

The soft landing is a journey, not a destination, Joe.

Joe Weisenthal (2:45)

Well, on that note, I really think we do have the perfect guest to start the year to discuss the state of the economy, where it's going, what policy levers might yet to be pulled as we go through 2024

I'm thrilled to welcome her first time coming on to the Odd Lots podcast, Lael Brainard, Director of the National Economic Council. Lael Brainard, thank you so much for coming on Odd Lots. Really appreciate you joining us. Why don't we just get started? So on Friday, we had the latest December non-farm payrolls report.

Headline looked pretty solid, unemployment, wages, job creation better than expected, but we did see some weakening in measures like labor force participation rate, prime age, employment to population, U6 measures of underemployment. Is there anything that concerns you right now about the momentum of the labor market as we head into 2024?

Lael Brainard (3:38)

Well, I have to say, taking a step back, that the labor market looks really strong. If you think about it, it started 2023 with unemployment already below 4% and it maintained that. In fact, it's been below 4% now for just about two years, which I think is, we haven't seen that for 50 years. And even despite the fact that we started the year from a position of low unemployment, the economy created an additional 2.7 million jobs, which is really a record.

And in terms of thinking about the economy going forward, the growth of the economy has been quite good, productivity has been up, and inflation has actually come down during this time of strong employment growth. So that also looks like a pretty healthy economy.

Tracy Alloway (4:32)