The Economy Looks Fine. Why Doesn’t It Feel Fine?

Americans feel pessimistic about the economy even as the stock market soars and unemployment remains low. Kara speaks with a panel of economic experts to explain the disconnect. She’s joined by Atlantic staff writer Annie Lowrey, Catherine Rampell of MS NOW and The Bulwark and economist Claudia Sahm. They examine the impact of President Trump’s latest round of tariffs, the economic fallout from the Iran war and the hidden weaknesses in the current labor market. Plus: How vulnerable is the broader economy to an AI bubble? And what happens when economic growth increasingly benefits investors rather than workers? Questions? Comments? Email us at [email protected] or find us on YouTube, Instagram, TikTok, Threads, and Bluesky @onwithkaraswisher. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  I really think of, you know, the past six, seven years as basically being an experiment telling us how much do people hate inflation? And they really hate it. And we had not had a big economy-wide test of this in a really long time. We weren't quite sure, right? It's a very different economy than the last time than we had this kind of like runaway prices. Plus, what's worse now is the price of housing, of childcare, you know, they're nuts and people just despise it.

• 0:42Kara Swisher?

  Hi, everyone. From New York Magazine and the Vox Media Podcast Network, this is On with Kara Swisher, and I'm Kara Swisher. Today, we're talking about the state of the US economy. Inflation has remained stubbornly high, above the Federal Reserve's 2% target since March of 2021. Rising costs for basic necessities like housing, food, and energy have led to what many Americans feel is an affordability crisis. The AI boom is fueling massive gains for a handful of tech companies, while nearly three-quarters of Americans worry that AI will eliminate jobs in some industries, according to a recent Reuters/IPSOS poll. Add to that the likely expansion of the Iran War and President Trump's renewed trade war, and it's no surprise that Americans' economic outlook is somewhat pessimistic.

• 1:26Kara Swisher?

  I've gathered a panel of experts to break down some of the biggest issues facing our economy right now. Annie Lowry is a staff writer at The Atlantic and the author of Give People Money. Catherine Rampell is an MS Now contributor and the economics editor for The Bulwark. Claudia Sahm is the chief economist at New Century Advisors and the founder of Sahm Consulting. She previously spent 12 years at the Federal Reserve Board, where she developed what is known as the Sahm Rule, a way to identify recessions in real time. I think it's really important to talk about the economy. Obviously, it's going to be the biggest deal in the election, and it's what people are worried about right now, given all the various forces at work at the economy, from the war to AI to just a feeling that something is off.

• 2:10Kara Swisher?

  So it's important to get some clarity here. Our expert question today comes from Mariana Mazzucato, an economist, author, and professor at the University College in London. So stick around.

• 2:35Speaker 02

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• 3:06Speaker 03

  I'm Ina Garten, and each week on Happy Hour, I invite new and old friends for a drink and a fun conversation at my kitchen table in New York City. On this week's episode, I'm joined by Julia Louis-Dreyfus. We talk all about attending a fashion show in Paris together, throwing dinner parties, and making her Broadway debut in other desert cities. New episodes of Happy Hour are available every Wednesday. You can watch on YouTube or listen wherever you get your podcasts. Cheers.

• 3:47Kara Swisher?

  Annie, Catherine, and Claudia, thanks for coming on On.

• 3:49Speaker 00

  Thank you for having me.

• 3:50Speaker 04

  Yeah, great to be here.

• 3:51Speaker 00

  Yeah.

• 3:51Kara Swisher?

  So before we get to the data, let's start about how Americans are feeling about the economy now. A new Washington Post/IPSOS poll found that people are generally pessimistic, with one in five saying they think the economy will improve in the next year. That's not very good. What do you, each of you, just overall, what do you think the biggest factor driving economic pessimism is right now? Catherine, Annie, and then Claudia.

• 4:12Speaker 04

  I think people have kind of been soured on the economy for years at this point. And in some ways, that makes sense, and in some ways, that do seem out of whack with the data, like prices have been elevated, wages have not been, depending on which measure you use, have not been keeping up, particularly since the Iran War started. But, you know, obviously, the elevated prices elevated inflation predate that. We've been dealing with above-target inflation for over six years at this point. So there are a lot of things to be cranky about. That said, the degree of crankiness does seem a little bit outsized relative to the

• 4:54Speaker 04

  amount of crisis, if crisis is a quantifiable term, in the economy. It's a combination of high inflation, kind of stagnant economy, and frankly, a lot of political disgust that sort of ends up as referred pain towards the economy.

• 5:11Speaker 00

  I think Catherine is completely right. There's a lot to not like about this economy. Even relatively high-income families that are making in the low-six-figures families, which, you know, we don't generally worry about them a lot versus a family that's making $40,000 a year, are really squeezed by price pressures. That said, I think that basically the consumer sentiment and the economic sentiment numbers are no longer exactly reflecting just economic and consumer sentiment. I think that they have to do with our media and political environment. And so I think that those numbers essentially are not exactly telling you a lot about real economic conditions versus 20 years ago.

• 5:54Speaker 00

  But I think that the sense that we are in a declining democracy, that we have complete lack of trust in institutions and one another, some horrible hangover from the trauma of COVID and everything that came out of it, and also the media environment that we're in, where the media itself has gotten more negative, and also people are getting their news now from short-form video, from these sources that I think can really color your perception of what you should have and what you do have. I think that those numbers now, we should think of them as a more generalized sentiment number, not like, how much money do I have in my bank account?

• 6:30Kara Swisher?

  Right. How do I feel?

• 6:31Speaker 00

  Yeah. And we could see gains in the economy, and they would show up, and the numbers are depressions in the economy, and they would show up. They've just become a different measure, in my mind.

• 6:39Kara Swisher?

  So we should include more measures?

• 6:41Speaker 00

  Yeah.

• 6:41Kara Swisher?

  Claudia?

• 6:42Speaker 05

  So I would add one more thing to the mix in terms of the uncertainty, the insecurity that people feel. So a few years ago, you know, inflation had come down some from its pandemic highs, and unemployment rate was low. And so I'm an economist, I was looking at all this data, and it really looked like things were at least improving, not great all around, but improving. And yet, these consumer sentiment measures were still really negative. And I, you know, was trying to talk to people and be like, help me put the pieces together. And one woman pointed out to me, she's like, you know, on paper, we do look better than we were a few years ago, like coming out of the pandemic. But she's like, I don't feel it, because it feels like the next shoe could drop.

• 7:20Kara Swisher?

  Right. Whether it's AI or whatever it happens to be.

• 7:23Speaker 05

  Right. And I think that I really trace a lot of this back to the pandemic, which was a huge, out-of-nowhere, just upended people's lives. And frankly, between policy decisions and other, it just feels like we're in this rolling mess of uncertainty. And that, I think, weighs on people. And also, as they try to navigate, prices go up, or there's tariffs, or there's this and the job, like, it takes a lot of effort to go do the bargain shopping, to go do, you know, try to figure out the way to deal with this. Do you go get a new job? Do you not? It's like a tax on people. They don't pay it necessarily directly, but it just weighs on them. So I've come to understand, like, as I always said, like, those measures are picking up more than economics, but I think it is relevant still to policy.

• 8:08Kara Swisher?

  More of a vibe thing, like, in that way. So recent Labor Department data show that inflation did cool in June. The brief Iran War ceasefire gave Americans a break on gas prices. That's not expected to be the case this month. Catherine, after several years of rising consumer prices, are Americans just more price-sensitive? Or how is it showing up in spending behavior when it comes to persistently high food prices? I have noticed them. I've never noticed food prices, and I, you see them everywhere you go, and you don't know why.

• 8:35Speaker 04

  Yeah, I mean, I think that there is some cognitive dissonance in all of this, which is one of the underlying themes that we've been talking about, which is that prices are high, people are cranky, but people are still spending. And I know Annie's written quite a bit about this as well. And so... People are like mad that they're having to spend more money, but they're still spending the money as opposed to pulling back on their spending in response to those higher prices. But I think to Claudia's point about that mental tax, that is something that I have been hearing from consumers for a while. So like they're spending money, but they have to think more about each decision that they make. It's not like you go to the grocery store and you just have your list and you go down the aisles and you get the peanut butter and you get the eggs and whatever. Like maybe you're not going to get the fancy peanut butter this time.

• 9:20Speaker 04

  Maybe you have to like price compare and you're going to get the private label peanut butter. And so people are spending, but there's more exertion that goes into every choice that they make. And that is exhausting. But as long as people continue to have jobs and unemployment is still relatively low by historical terms.

• 9:39Kara Swisher?

  Yes, it is. Yeah.

• 9:40Speaker 04

  That means that they are able to keep spending.

• 9:42Kara Swisher?

  So Annie.

• 9:43Speaker 00

  And one of the weird things about what Catherine mentioned is that by some measures, people are less price sensitive. They are emotionally, their feeling is more price sensitive. But say that we have like a coupon and we get 50% off. It doesn't have the effect that it might have had 20 years ago. But I really think of, you know, the past six, seven years as basically being an experiment telling us how much do people hate inflation? And they really hate it. And we had not had a big economy wide test of this in a really long time. We weren't quite sure, right? It's a very different economy than the last time than we had this kind of like runaway prices. Plus what's worse now is the price of housing, of childcare.

• 10:27Speaker 00

  You know, they're nuts and people just despise it.

• 10:30Kara Swisher?

  Right. So you wrote about the great affordability crisis back in February of 2020. And you noted the price of housing represented the most acute part of the crisis. It's been six years, the US housing market still feels broken. There's more sellers than buyers at this point. The new Minneapolis Fed research found that only 53% of American adults own homes they live in. They're not buying and at the same time, the market seems very flat for a lot of people I've talked to. So what's the, what is the underlying problem of probably people's biggest cost that they would pay for?

• 11:00Speaker 00

  Far and away, housing, even if you are a person who is paying in your mortgage or in rent, an amount that an economist would say you're doing okay, you still might not be happy and it might not be easy to see that. Because like, let's say that you're paying an amount you can afford, $1,800 in rent or something like that, but you're still living with roommates or you're living in a neighborhood that you don't like. Or you're putting off, you know, proposing to your partner. That's not going to show up, except in a sentiment figure. And I think that's part of what we're seeing. But the housing, there's not an easy answer here. Some places are really building. But I think the truth is that, you know, the housing market is in a really tough place and it's going to be for a long time.

• 11:41Speaker 00

  And I think if we saw interest rates come down, which would help with affordability and help with building, we have so much pent up demand that you might not see prices fall, which is a really tough thing.

• 11:51Kara Swisher?

  Right. So but the 21st Century Road to Housing Act became a lot earlier this month. The package of provisions aimed at increasing the housing supply and making homes more affordable. What does that actually accomplish?

• 12:02Speaker 00

  I don't think it's going to accomplish a tremendous amount. Look, I think that there's not a lot of federal policy on the table that can affect this because overwhelmingly this is a local concern. And so we can incentivize local places to allow more construction. But you still have a lot of homeowners who say, hey, I don't want that giant thing in my neighborhood. You're still going through the more than 10,000 US jurisdictions that are in control of this and asking them to go one by one. I think actually the best policies that we've seen have been state and local. So California, for instance, has had a number of policies to induce building. But still, right, like timber is really expensive, labor is really expensive. This isn't a situation that we got into quickly, right?

• 12:46Speaker 00

  Really, I think the roots go back to the housing crisis before, before the bubble popped. It's not something we're going to get out of fast either.

• 12:53Kara Swisher?

  So of course, the job of keeping prices and inflation is under control belongs to the Federal Reserve and it has a new chairman, Kevin Warsh. We're now taping this on the day before the July meeting and it'll come out the day after. But let's zoom out. Claudia, I know you've expressed some skepticism about Warsh, in particular, how he sometimes uses standard economic language in non-standard ways. What do you make of him so far and his efforts to, I assume, get inflation in check so that he can lower those rates that Annie talked about?

• 13:21Speaker 05

  It's really too soon to have a firm opinion on Kevin Warsh. I mean, that's also partly by his design. He's been pretty quiet about.

• 13:29Kara Swisher?

  Yeah.

• 13:29Speaker 05

  His views on the economy, his views on what should be done. He's made very clear, we're going to have price stability, he's going to get inflation down. But as we talked about with housing, you have a problem that it took years to build. It's going to take some time to bring it back to, to be fixed. And inflation has been running higher than what the Fed puts as its target of 2% for several years now. So it's not going to turn on a dime with a new person in charge. I think, you know, the Fed is really aware of the inflation problem. Thankfully, we are at a moment right now where the labor market, if nothing else, appears very stable. So the Fed can kind of focus its attention on inflation, but it still has a tough decision to make. Should we step in and raise interest rates? Because that's creating more costs for people.

• 14:12Speaker 05

  And if you don't need to do that to get inflation down, well, then maybe you should hold off and stay on the sidelines. So it's hard to tell where, where the Fed is headed at this moment. And that's really going to be the judgment in the end on, on Warsh's leadership is can the Fed deliver on getting inflation down?

• 14:29Kara Swisher?

  And Trump doesn't want interest rates to rise, so there's political pressure.

• 14:32Speaker 04

  Yeah. I mean, I think, I think that's the big challenge for the Fed right now. Like it's always hard to be a Fed official and try to like make sense of all of the data, some of which is conflicting. It's especially hard when you have some messiness in the data today. But it's especially, especially hard when you have Donald Trump basically trying to screw up your job, which is what has been happening, right? That Donald Trump does not understand or is unwilling to learn that the Fed, in order to be effective, needs to be politically independent. Because if people don't believe that the Fed is independent, if they believe that politicians are in control of the money supply and are just like willing to print money whenever, then they don't believe that inflation can ever get under control.

• 15:16Speaker 04

  It becomes sort of like a self fulfilling prophecy. And Donald Trump, by very loudly leaning on the Fed, saying that he wants, you know, his new man at the Eccles Building to, to cut interest rates actually undermines their ability to cut interest rates in a way.

• 15:32Kara Swisher?

  May I ask, Claudia, is he his man, do you think, from what you can tell?

• 15:36Speaker 05

  Well, the president chose Kevin Warsh to be the Fed chair.

• 15:39Kara Swisher?

  Well, he chose Jerome Powell.

• 15:40Speaker 05

  So I, I take that as there was some alignment that the president saw in Kevin Warsh, someone he wanted to have at the Fed. Do I think that he's taking orders directly from the president? No, I don't. But he has an alignment. And I think one thing that's been unfortunate to what Catherine's talking about, there's some discussion of, well, the Warsh Fed, they need to raise rates just to prove he's independent. It's like, no, we should not be doing monetary policy to like satisfy some political statement, either direction.

• 16:08Kara Swisher?

  Right, either direction. So every episode we get a question from an outside expert. Here's yours.

• 16:13Speaker 06

  Hi, Cara. Hi, panel. I'm Mariana Mazzucato. I'm a professor at University College London, currently in Italy. I am Italian. So my question to you is the following. You're talking about the state of the economy, housing, cost of living. So I've written quite a few books, the recent one called The Common Good Economy, on how it's actually impossible to solve any problem with the current way we think about government as just, you know, a best fixing a market failure, always reactive, too little, too late. And I'm just wondering from your own experiences, maybe the cities you live in, where you've seen government of any type, you know, city level, regional level, national level, global level, actually get stuff done and do it through objectives?

• 16:58Speaker 06

  You know, there's so many different ways to do capitalism. And if you look at Vienna, if you look at Copenhagen, how they do housing and social housing is so different from American cities. But I think it is important to give people hope that there's different ways of doing things. And by looking actually at some positive examples, where the way that we governed went after the source of the problem instead of, you know, the symptom at the end. Thanks.

• 17:24Kara Swisher?

  So Catherine, you go first and then Annie and Claudia.

• 17:27Speaker 04

  I will talk about something that's actually not where I live, but that I've reported on before. So there is this sort of pilot program. I don't even know if you could call it a pilot since it's been around for a little while now that started in Flint, Michigan to give cash to pregnant moms, basically to address.

• 17:47Speaker 04

  Poverty and the various ancillary consequences of poverty at the source that basically the idea was that they were prescribing cash as a way to deal with a number of public health issues. It's called RX Kids. And so this started in Flint, Michigan. It turns out that it, you know, based on the data that they have available where they were giving cash to everyone, everyone within the city limits who, once they were pregnant, they were eligible and they continued to be eligible, I believe, for a year postpartum. Anyway, that they determined that it had resulted in much better outcomes in terms of higher birth weights and lower maternal depression rates, things like that. This is top of mind for me, I think, because I got a press release today saying that they

• 18:30Speaker 04

  are expanding it to part of Ohio.

• 18:33Kara Swisher?

  Annie?

• 18:34Speaker 00

  I think this is such a fascinating question, and I love that it was posed by the person that it was posed for. I'm such a big fan of her work. You know, in the last 10 years, I think the most amazing governmental innovation that I can think of was in Project Warp Speed, right? We got a COVID vaccine far faster than we expected. It saved a ton of lives and the material good that it did, I think, was really significant. But it didn't build trust in government, right? In fact, I think the vaccines were part of this broader collapse in trust in institutions. And it's something that I think about a lot, right? How do you have a good program that also creates these benefits that people can recognize

• 19:16Speaker 00

  it's a good program, that people can feel some trust in government? Like, how do we create these systems such that we're all in the same universe and pulling towards the same goal? It's been such a long time since I've seen that and felt that.

• 19:28Kara Swisher?

  Right, right. Claudia?

• 19:30Speaker 05

  Right, so it inverts the positive spirit of the question, but I think one thing that I've spent a lot of time watching Reese is just the effects of downsizing the federal government. Federal employment is the lowest level in decades, and yet it does affect the government's services. Like, I see it a lot in terms of the statistics, you know, they don't have as many staff, like 20% less staff, less resources to collect data. But also, this came up in the CDC outbreak. They didn't have their communication staff. It's just hard to do these services, and I think it's in the spirit of you don't miss something until it's gone. And it's important to really underscore, like, the quality of the services we had, and they've really slipped, and that can be fixed. So that's, you know, kind of what I would focus on.

• 20:10Kara Swisher?

  Don't it always seem to go, you don't know what you got till it's gone, kind of thing? And now we have, you know, exploding diarrhea and measles at this point.

• 20:17Speaker 04

  Among other horrors, yes.

• 20:19Kara Swisher?

  We'll be back in a minute.

• 20:23Speaker 07

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• 21:03Speaker 07

  Hello, I'm Chris Richards, general manager at Saffron Volkswagen Richmond. I'm here to announce an exciting new program that I want you to listen to. Here's my friend, Happy.

• 21:15Kara Swisher?

  Hi, I'm Happy Harry Turner, special finance manager at SaffronCredit.com. If you're in an open Chapter 13 bankruptcy, recently filed a Chapter 7, or you've been turned down because of credit challenges, don't give up. For nearly 30 years, I've helped people get reliable transportation when others said no. Visit SaffronCredit.com. Remember, I'm not happy unless you are. I'm Kara Swisher, and I like people who say the quiet part out loud. In fact, I love it. That's Tiger Sisters, a new podcast that recently joined the Vox Media Podcast Network. Cherie Brook-Lu and Jean Lu are real sisters who built their careers at LinkedIn and Goldman Sachs. On their weekly podcast, they're giving the next generation practical tips on how to get ahead, how to write emails people actually answer, how to make your LinkedIn profile

• 22:00Kara Swisher?

  stand out, and how to keep learning as an adult. It's straight talk about money, career, and relationships every Monday. Follow Tiger Sisters wherever you get your podcasts. So let's take a step back and look at what else is fueling inflation, starting with President Trump's new tariffs. After a temporary 10% global tariffs expired last Friday, he imposed dozens of new tariffs of 10% to 12.5% on goods from more than 80 countries. Trump said he has additional tariffs planned, including duties of up to 200% on generic drugs. The Supreme Court struck down most of his global tariffs in February. Catherine, one of your issues, how is the administration legally justifying the latest round?

• 22:41Speaker 04

  So there are different tariff authorities that the president can use, and they have, every one of them tends to have, like, pretty constrained rationales. And so they're kind of cobbling together any sort of pretext that they can for tariffing other countries in ways that are, you know, I'm not a lawyer, so I can't speak to the legality of all of this, but are at least very intellectually inconsistent.

• 23:06Kara Swisher?

  The first round of tariffs sent shockwaves through businesses and supply chains. And you described it as Trump's economic abuse. Are they more prepared, given all these hijinks that he's attempting to impose more of them on them?

• 23:17Speaker 04

  They being the administration?

• 23:18Kara Swisher?

  The businesses?

• 23:19Speaker 04

  No. You know, it's just like we were talking before about how it is a tax on consumers to have to deal with inflation. It is absolutely a tax on businesses to have to deal with, you know, basically having to watch, have someone full-time monitoring Trump's Twitter feed or his Truth Social feed, because that's how policy is being made. It's not being made through the normal Administrative Procedure Act processes. It's being made by Trump's itchy Twitter finger, and as a result, businesses are having to devote a lot of time, a lot of resources, a lot of labor on calibrating, like, do we send the shipment now? Do we keep it on the boat? Do we keep it at the dock? Do we keep it at the port? Do we try to put it in this warehouse?

• 24:00Speaker 04

  You know, it's just such a tremendous inefficient waste of time and resources, not just the actual cost of the tariffs, but it's like managing all of these logistics they did not have to think about before. And not only managing that, but like managing relationships with the administration, right? This is the reason why corrupt governments, non-democratic governments, tend to have, in general, worse economic outcomes, because businesses have to spend a lot of time, like, figuring out how to, like, appease the authoritarian rather than what makes the most business sense.

• 24:34Kara Swisher?

  So the economy, obviously dealing with the war in Iran, the affordability crisis, inflation, we talked about. Annie, what are the short-term and long-term consequences of Trump continuing his borderline obsession with tariffs?

• 24:44Speaker 00

  This is bad. This is really bad. And I think that in some ways, when the original large tariffs got pulled back, people stopped paying attention, but businesses did not. Businesses on the margin, especially small businesses, right, like a Ford or a Google probably has hundreds of lawyers dealing with this stuff, or they can bring in legal counsel.

• 25:06Kara Swisher?

  Still money spent.

• 25:07Speaker 00

  If you're like a four-person business, you're not going to be able to do that. You could be bankrupted, right? And we actually saw that happen. And so I think it's one of these things, like, it's just why? And I think he'll just continue doing it for as long as he's in office. He really cares about it sincerely. He does not care about a lot of policy sincerely. This he cares about sincerely.

• 25:26Kara Swisher?

  This is he does. But to quantify the strain on the economy of these compounding sources is also difficult.

• 25:31Speaker 00

  Very hard.

• 25:32Kara Swisher?

  Because it's very hard to do. So Defense Secretary Pete Hegseth told lawmakers last week that he estimated the Iran war to cost $37.5 billion. In just the past few days, the war has escalated and oil prices have shot back up. So far, the US economy has been pretty resilient. Claudia, at what point will Americans feel the broad impact of the war beyond food and gas prices? And what are the potential economic consequences of yet another extended war in the Middle East?

• 25:58Speaker 05

  So as the conflict drags on, it has effects on energy, food, it can potentially seep into a lot of other goods and services. I mean, energy is really a cost that isn't a lot of what we spend our money on. So a lot of it depends on how long the conflict lasts and how bad it gets, right, in terms of disruptions in, like, the Strait of Hormuz in the Middle East. So it's all pointing in the wrong direction. It's, you know, without knowing how long it lasts, how bad it gets, it's hard to quantify, impossible to quantify what the effects would be on people, but it goes in the direction of cost. And it's just, the war in the Middle East is another example of the administration pushing forward policies that unleash a whole set of costs on the economy, just like the tariffs unleashed a whole set of costs on the economy.

• 26:42Speaker 05

  And that is, really, we can see that in the inflation data. The broad-based increase in the price level over the last year and a half really does tie to some policies.

• 26:51Kara Swisher?

  Tariffs, yeah.

• 26:52Speaker 05

  They may be justified in other, like, outcomes, but like, immediate, they are costs. And another thing you see from the administration... They really don't recognize that they're creating those costs. With tariffs, they're still like foreigners are paying them. Like, there's really good data to say foreigners are not paying them. We are.

• 27:09Kara Swisher?

  They've been corrected many times. They've been corrected many times on that topic. And even someone who does know, Scott Besson, pretends otherwise, which is, I think that's what they do on a lot of issues. It feels like the economy is kind of factored in, though, Trump's erratic decision making, the taco, as it came to be known. When could that shift, where they just assume erratic decision making, correct?

• 27:30Speaker 00

  I think that they absolutely already do. I think that if you are talking about financiers and Wall Street, they have proven remarkably adept at making money off of not a rising tide lifting all boats, but chaos, right? So you have people that are algorithmically trading off of, you know, Truth Social posts. I think that there is a fair amount of, right, just kind of like guessing where he's going. Trump has always been quite suggestible to the people that he's talking to. And so I think that that has become another source of kind of like betting around this. And I'd note that there's a lot of things coming down the pike for the Trump administration that I think is going to prove really hard, biggest one of which is, in my mind, the Medicaid cuts.

• 28:11Kara Swisher?

  Mm hmm. In terms of people seeing effects?

• 28:13Speaker 00

  Yes, in terms of people literally losing their insurance and literally not being able to afford cancer treatment.

• 28:18Speaker 04

  I mean, we've already seen millions of people lose SNAP

• 28:21Kara Swisher?

  SNAP, exactly.

• 28:22Speaker 04

  benefits at this point as well. And that coinciding with rising food costs because of the war, because of some things that are not Donald Trump's fault, including like a drought in the Midwest and El Nino this year, you know, I don't know that we can lay all of that at the president's feet. But you do have all of these other factors pushing up prices at the exact same time that support for people to absorb those costs has been declining. And so those, those things coinciding has been, you know, bad economically, will be bad politically presumably for the president as well. That said, I don't think it's going to result in some sort of taco where they somehow try to beef up the safety net or

• 29:04Kara Swisher?

  Right, no, not at all.

• 29:05Speaker 04

  or otherwise pull back on tariffs.

• 29:06Kara Swisher?

  That one, that one he's not going to do. Let's shift to the US labor market and jobs. Last month, the Supreme Court upheld the Trump administration's authority to end temporary protected status of Haitian and Syrian immigrants. The ruling affects hundreds of thousands of foreign workers who will be let go by their employers this month. The healthcare industry in particular and elder care rely on this labor pool. We're seeing the impact of Trump's immigration enforcement across industries, including healthcare, agriculture, construction, hospitality. Claudia, first, what point do worker shortages start to become untenable for employers and consumers?

• 29:39Speaker 05

  So at this point, we haven't seen, like, in an aggregate level, much evidence of the worker shortages. You, in certain industries, say, like in construction, there's more pressure, which shows up often in terms of like wages growing more quickly. But there's also a lot of demand, building out AI data centers. So it's hard to piece out, like, is it actually a supply issue versus more demand? But, but that's where we would look first. Industries that are very, have a lot of native born employment in them, we do see a big drop in the growth of the labor force. I mean, it's really striking how, I mean, basically, the labor force is not growing, which is anomalous, like, we just haven't seen that, right? And so even if we don't end up with shortages and real pressure points that could end up

• 30:22Speaker 05

  in higher prices, things are slowing down in the labor market overall. And we don't see a lot of dynamism. We don't see people moving around in different jobs. So there, there's something under the hood, kind of fundamental shifting in the labor market.

• 30:34Kara Swisher?

  According to the Labor Department's June jobs report, the labor market appears to be in better shape than it was this time last year. Job growth has picked up. Long-term unemployment means people are out of work six months or more, is near its highest level in years. I did an interview with former Commerce Secretary Gina Raimondo, and she made the point, you have to look deeper, as you were noting, than the top line stats to see whether the labor market is healthy. And she suggests, by the way, it's not. First, Annie, what's hiding underneath these numbers? And then Catherine?

• 31:02Speaker 00

  There's a lot of weirdness being hidden under there. So I think that you are seeing, we haven't had growth in the white collar labor market. In fact, it's shrinking a little bit, not hugely, right? We're not seeing mass layoffs. But I think that, plus all of the talk about AI, is really, really, really freaking people out. Young college graduates are, in many ways, having a little bit of a tough time in the labor market. The AI build out is having some positive effects in some places. So you can see, like, rising land values for certain farmers who are selling their land for AI. And I think that there's this question of fragility. If you have consumers that are very tapped out, if you have businesses that aren't hiring,

• 31:45Speaker 00

  if just everybody is a little bit concerned about what's going on, what does it take? Economy has proven enormously resilient over the past six years, shockingly resilient, right? Like, whenever we get another recession, it's going to be one that was predicted that it would have been here every month for like the last, you know, five years. So I'm not saying that. I do think that the labor market is pretty good, and you can see that in a lot of ways. But I do think that there are some strange things happening, including the way that the AI boom is and isn't supporting the economy right now.

• 32:14Kara Swisher?

  We'll get to AI in a second. Catherine, about labor?

• 32:18Speaker 04

  So I do want to go back to people who have TPS, who are about to essentially have their livelihoods ripped away from them and their legal status ripped away from them. That's imminent, according to recent reporting. And you're going to probably have some mass detention campaigns that happen in places like Springfield, Ohio. So I do think you're going to see some major disruptions coming up in the next year as a result of all of that. And maybe that'll show up in things like prices and things like wages, and maybe that'll just show up in, in shortages. You know, people not being able to get the groceries that they need or not able to get the healthcare.

• 32:56Kara Swisher?

  Healthcare, help they need.

• 32:57Speaker 04

  Yeah, exactly.

• 32:58Kara Swisher?

  Yeah, because those are two professions, two areas that really do depend on these people.

• 33:06Kara Swisher?

  We'll be back in a minute.

• 33:19Speaker 07

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• 33:51Speaker 07

  What if we told you there was one thing you could eat to reduce your risk of death by about a quarter? Interested? And what if we added that this magical substance can dramatically lower your cholesterol, improve your mood, and keep your weight stable? No, it's not protein. It's actually fiber, the least sexy, most overlooked nutrient of all.

• 34:11Kara Swisher?

  But what is fiber? How could one nutrient do all those amazing things? And how can you get enough? Is a powder you stir into some water going to do it for you? All that, plus the strange tale of the gorilla poop obsessed father of cornflakes in the latest episode of Gastropod. Find Gastropod and subscribe wherever you get your podcasts.

• 34:33Kara Swisher?

  So let's end by looking at how AI investment is affecting workers, companies, and the economy as a whole. A growing number of companies, including Cisco, IBM, Salesforce, and Uber, are citing AI as a contributing factor to layoffs, although now that's unclear. At the same time, a 2025 MIT study found that despite an estimated $30 to $40 billion in enterprise spending on generative AI, 95% of organizations saw no measurable return, something Scott and I have been talking about for a long time. Claudia, to what extent are companies engaging in so-called AI washing, using tech to justify layoffs? And what evidence actually does it tell us about its impact on the employment so far?

• 35:11Speaker 05

  Anytime a company does a mass layoff, I mean, they're going to try to package it, explain it in a way that will, will go over well with investors, right? So I wouldn't, I do think there's an aspect of AI may have enabled some of these companies to reduce their headcount, but there were probably a lot of other reasons, like they overhired during the pandemic when they thought, you know, everyone was going online forever. And, you know, so there were probably a whole host of reasons, and they put forward the one that investors might be most positive about, like, oh, you're using the technology. So I think that's happened. But I also would say that's probably not a new phenomenon, right? And that's why you don't want to just take the companies at their word. You want to go look and see, can we make sense of it in the data? Do all the pieces fit together?

• 35:52Speaker 05

  And frankly, what has been really challenging, this is a relatively new technology, there's a lot of experimentation going out there, the data, it's, it's tricky to catch up with it. And you have really good studies, sometimes using the same data, that'll just define exposure to AI a little differently, or they might set up the comparisons a little differently and come to opposite conclusions on how this is affecting, how AI is affecting employment. So I think it's just more that, like, we're at a stage where you can't draw a firm conclusion because there's just a lot of experiments running in real time. And maybe some of those companies making the analysis, maybe for them, they actually are doing the layoffs because of AI, but that is not the broad Sense right now and automating away human beings is very difficult.

• 36:38Speaker 05

  Right, like with all the tasks that that we do.

• 36:40Kara Swisher?

  Correct, yeah. Yeah, there isn't much effect as there are. But the stock market has been on a tear in the past few years, fueled in part by this AI boom. Pretty much that's what is fueling it. It's been made a lot of people feel rich. Bloomberg's Stacy Venick Smith recently wrote about the wealth effect, which some economists estimate has accounted for roughly a third of consumer spending growth since the pandemic. It's rich people buying things. They're feeling good about themselves. Again, Scott talks about this a lot. But Alphabet and Tesla's earnings last week, concerns about growing AI spending helped wipe out roughly $890 billion of the combined market value with a magnificent seven. These companies focused on AI together. These companies account for about one third of the S and P's 500's total value, which is astonishing.

• 37:24Kara Swisher?

  Catherine, can stock prices continue to support consumer spending in the broader can rich people feeling a little less rich? And, you know, SpaceX is down, Tesla's down. All the, all the companies are pretty much down, except for Apple.

• 37:36Speaker 04

  I mean, if I knew the answer to that question, I would be a very rich woman and I'd probably keep the information to myself.

• 37:41Kara Swisher?

  Yeah.

• 37:41Speaker 04

  I do not know the answer to that question. I will say that one thing that is troubling, that is like another one of these lurking risks under the hood is that so much of the market is driven by just this very small handful of stocks. The, the, right? That in, in terms of market capitalization, in terms of investment, in terms of revenues, it's just like they are the whole story. And so that's concerning, particularly given fragility elsewhere in the economy. If we've kind of put like all of our eggs in this one basket and then that, I don't know what the rest of this metaphor would be, the basket explodes, then, you know, a lot of this other fragility could become a lot more visible.

• 38:25Speaker 04

  All of these other things we've been talking about, all of these other things, all these other factors that have been battering the economy, in many cases, unforced errors. One of the themes of all of this is like, there's a lot of, you know, precarity. There's a lot of insecurity, but there's also a lot of resilience. But is it resilience? Or is it just that like there is this one part of the economy that's propping everything up? And if it ceases to continue doing so, what happens to all of these other problems?

• 38:52Kara Swisher?

  Right.

• 38:52Speaker 04

  That we've been talking about, particularly since we have really erratic policymaking that is making it harder to stabilize the rest of the economy.

• 39:00Kara Swisher?

  Right, I know you feel bad that Elon's not a trillionaire anymore, but.

• 39:03Speaker 04

  I feel very sad about that.

• 39:05Kara Swisher?

  Sad about that. So, Annie, you recently described the AI economy as, quote, a trillion dollar or a boros of buying and selling investment and equity staking, all happening between San Francisco and San Jose. That's a snake eating his tail for people who don't know. Talk about the concentration of capital. Tell us about the durability of the AI boom. Because it feels a little to me like when I was covering AOL in the early days and it was the same $2,000 going around. In this case, it's $2 trillion or $200 billion.

• 39:32Speaker 00

  So I think there are a bunch of things to give us some hope that this is going to be kind of okay. So one is that a lot of the companies doing the borrowing and the buying and the selling here, they really are profitable. Google is really profitable, like actually. That's not fake. And a lot of the money going into this is actually cash. It's not borrowing, or at least it used to be.

• 39:52Kara Swisher?

  Well, they're borrowing. They recently tried to borrow.

• 39:54Speaker 00

  Now they're borrowing, right? And so when there's two really, really big things that I'm concerned about, first is the circularity, right? This is all a very circular economy that they are all buying and selling. They are all interconnected with each other and becoming even more interwoven. So say, for whatever reason, we need way fewer chips. All of a sudden you have, you know, a huge decline in the price of one of these companies, but that means that they can't pay their debts to the other. The second is that the AI build out has been so expensive that these companies are going into debt. So they are issuing corporate bonds and they are borrowing enormous sums, not from the traditional banking system, but from the shadow banking system, non-banking lenders. Those deals are structured to be off of their traditional balance sheets.

• 40:39Speaker 00

  If you're not starting to get worried, the deals are very, very opaque, right? We don't have a lot of insight into who is lending what for whom, but we have reason to believe that institutional investors, so people taking your pension or your index funds are really helping this out. So if we don't have that visibility in and we have a huge amount of money that is being staked on a very circular economy that is making a bet that the returns on AI are not just going to come in, but are going to come in on a schedule that will allow them to pay their bets off, maybe it works out, maybe it doesn't. And the entire, like, all economic growth right now is predicated on this one bet that, you know, very interestingly, your average person

• 41:23Speaker 00

  has nothing to do with, they are not investing in it. The way in which they are being touched by this is mostly through, you know, if they have a retirement fund.

• 41:32Kara Swisher?

  For a 1K. So, so if we're headed for an AI bubble collapse, Claudia, how vulnerable is the broader market? And who will be impacted?

• 41:39Speaker 05

  An AI bubble collapse at this point would be very damaging, right? Because it has, you're talking about in financial markets, there's a lot of wealth tied up in terms of the AI spend in the quote unquote, real economy. We can see a lot of capital investment that's happening. I mean, real, like durable goods are being bought to put in place. And I mean, that's very exciting to build up our physical capital. We can be very productive, but that is certainly in the, you know, kind of real economy, AI has build out is very much important. Not doing it all, but it is important. And then the other piece that we kind of hinted at and touched on a little bit is it is a positive overlay, right? Especially in financial markets and businesses. AI is the technology of the future. It's going to be transformative.

• 42:24Speaker 05

  It's going to be profitable. That's been a real like positive message, a positive vibe that has counteracted a lot of like negative things, like we have a war in the Middle East and we have, and I do worry too, that taking some of that positive overlay away could just amplify the collapse. One thing I'd like to point out that I think has been a positive development in recent months, you're seeing, I think, some healthy skepticism in financial markets. So announcing more capital expenditures, the market pulls back some in the bonds or they're requiring bigger interest rates. Credit spreads are going up. So there is some telling markets, hey, maybe, maybe you're going a little too fast. Slow down. Are either of you, Annie or Catherine, worried about a bubble bursting here in the stock market?

• 43:07Speaker 04

  I mean, I'm, I'm worried. Look, I, I think it's very easy to see the negatives of all of this, certainly, including all of this investment that's been going into these new data centers, all of the competition, because a lot of the AI investing companies are like assuming that it's a winner take all market. And so if like somebody actually wins, does everybody else just suddenly pull out? And what kind of knock on effects does that lead to for those firms and for those that depend on them? Because of all of the circular dependencies that Annie was referring to. So I'm definitely concerned about all of that. I do think it's important to sit a little bit longer

• 43:50Speaker 04

  with a point that Claudia made, that there will potentially be some positives. It's easy to see like which jobs disappear as a result of a big disruptive new technology. It's harder to imagine what jobs do come about. And I don't want to sound Pollyanna-ish, but I, I just want to like temper a little bit of the doom and gloom about how lots of people are going to lose their jobs. And that may well be the case. We are seeing that, particularly in certain companies. You know, maybe it's AI washing and maybe it's not. But there will be jobs that are created. There will be people who are made more productive. And we don't know exactly where those benefits will fall. And I am hopeful that we will end up seeing lots of opportunities created by all of this

• 44:33Speaker 04

  in addition to some dislocation and, and that, you know, we really just need to work on, I think, beefing up the safety net so that those who are in that difficult transition are helped out in some fashion, right? I mean, I think we've, we've done a poor job in the past.

• 44:49Kara Swisher?

  Always.

• 44:49Speaker 04

  At helping people transition when their jobs are displaced because of, whether it's because of globalization.

• 44:55Kara Swisher?

  Yeah, see NAFTA.

• 44:56Speaker 04

  Globalization or automation or anything else. But I do think that there are a lot of opportunities. And what we should be thinking about from a policy perspective is how to make sure that those opportunities are available to as wide of a swath of the population as possible and that we help the people who are hurt.

• 45:11Kara Swisher?

  Annie?

• 45:12Speaker 00

  I think that the thing that I am concerned about beyond just a stock market correction, which would be painful for all of the reasons that Claudia and Catherine identified. And it does mean that, you know, a lot of people, right? Like there's always ancillary people that had nothing to do with it and they are going to be hurt. Um, the other thing I'm somewhat concerned about is that this is taking place again outside of the traditional lending system. So I've had the question of like, are regulators on top of this? Are they? The non-banking institutions should be, but this is new and it's unusual. And these deals are strange. So again, I'm not worried about like an Apple or a Google, even with huge losses, they're going to be fine. But like, what about like the smaller little guts of the system that we don't know?

• 45:56Speaker 00

  Are we really keeping a good eye on that? I don't have a great answer to that. But to Catherine's point, we think about the jobs created by AI. We think, oh, it should just be software engineers or something. And it's like, no, actually, when the whole economy gets wealthier, you get all kinds of new jobs that are created by AI in some strange way, but are not like literally tied to it. So I do think that that's positive. And there are other really positive things happening in the economy. We have some cool things happening with energy. And I think that it's all a matter of, we know that we still have this very broken safety net, all of these policy problems, this lack of trust. But are we allowing these really positive things to come through?

• 46:35Kara Swisher?

  Yeah, absolutely. So it's a theme, that's the theme that's been underlying, though, everything we've talked about, the giant gap between what's happening in the markets and what's happening in people's lives, right? Earlier this year, labor's share of the economic output hit an all time low at this point, while profits hit a near record. How long can the gap continue to grow before something gives in that regard? When these benefits you're talking about accrue to more than just a small group of people? Catherine, you go first, then Annie, and then Claudia.

• 47:02Speaker 04

  I mean, this is a political economy question, right? It, it's an economy question, but it's also a political economy question. We started this conversation by talking about like. Economic sentiment and what does that mean? Is that really political sentiment? And I think all of these things are wrapped up in one. My fear is that as people become more disaffected with economic outcomes, more resentful that they've been left behind, that somebody else is getting ahead. Maybe it's the immigrants, maybe it's the foreigners, maybe it's the billionaires, that politicians become less prone to trying to fix actual problems and more prone to just doubling down on blaming the scapegoats. And blaming the scapegoats is easy. Punishing the scapegoats is easy. Actually fixing the problems is a lot harder.

• 47:47Speaker 04

  You know, there's a part of me that worries that we're going to end up in this sort of like infinite doom loop, like in Argentina, where you have the left-wing populists and the right-wing populists just alternating power and blaming each other and never actually solving problems.

• 48:02Kara Swisher?

  Right.

• 48:02Speaker 04

  So that's the, that's the real concern that I have, that we, we do have these real underlying problems with economic inequality, with stagnation of living standards. And I worry that our political leaders are not as focused on actually doing the boring technical work of fixing them and instead are much keener on...

• 48:22Kara Swisher?

  To tap into the anger.

• 48:23Speaker 04

  And to tap into the anger and, and to find the, the easy scapegoat rather than the hard fix.

• 48:29Kara Swisher?

  Annie?

• 48:30Speaker 00

  I think that that is completely correct. One thing that I think has been fascinating about AI is that, you know, in the early, mid 90s, when people were getting computers and the internet, there was really this broad feeling of like, oh my gosh, this is going to be amazing. Right? Like, we'll be able to connect with people all over the world. This is going to change this, that, and the other. Right? Like, maybe we'll send more people to the moon, all of this. And I think in part because the AI leaders have been so vocal about the downsides that they see of their own technology, right? Like, I always think, like, can you imagine if Ford came out and they were like, you know, the car is going to be great, but we're going to kill a bunch of your kids.

• 49:10Kara Swisher?

  Right.

• 49:10Speaker 00

  Right? Like, everybody would be like, what are you talking about? They'd be like, some of your children will die horribly. We're so sorry, but it'll still be worth it.

• 49:18Kara Swisher?

  It is something else.

• 49:19Speaker 00

  That people are now, they're like, don't do this to us. AI sentiment is really, really low.

• 49:24Kara Swisher?

  It is.

• 49:24Speaker 00

  And I think it's because they see it as another technological advance that's going to lead to them getting screwed. And one nice thing, I think, about inequality is that it's very amenable to policy solutions. This is not something that we don't know how to fix. And so I do think that starting to reduce this sense of fragility for people, make sure that there are those AI guardrails, so it's not going to be that all of a sudden all of these workers are headed to retirement, believing that they're never going to have the lives that they wanted. I think it's, it's really tough and we've not seen that kind of deep policy work to just get the, you know, everybody feeling involved again and productive again.

• 50:01Kara Swisher?

  Right. Claudia?

• 50:03Speaker 05

  Yeah. And that declining labor share that you talked about, that puts some really important institutions at risk, right? And so even if AI doesn't mask unemployment, maybe makes people more productive, I don't really think it's going to push up wages that much in terms of getting a bigger share. And so many of our programs talk about social security as one example, like, so much of our taxation really depends on workers making money and that's, that can feed into it. If the workers are not the ones gaining, if it's more and more going to the capitalists, which some of that is good, but it will cause some of those programs to be, you know, really under strain. So you think we have discontent right now? Talk about the discontent when social security falls apart. Right?

• 50:46Speaker 05

  And we are not that far from that program really coming into conflict. So I'd say a lot of the trends we're talking about, they're pointed to actually get worse, which is going to have some big conversations in the political economy space about, well, how do we fix these problems? Because people are not going to be happy if they're just left to fall apart, those kind of programs.

• 51:05Kara Swisher?

  Right, absolutely. Anyway, on that happy note, what one thing is positive that you see about the economy and what thing you worry about the most? Catherine, you do it first, then Annie, then Claudia.

• 51:16Speaker 04

  I don't know if this is about the economy or the political economy, but I think that people are starting to recognize the things that really matter about the economy that they may have taken for granted. And that means some of our institutions that help make the economy run, that means immigrants who bring new life, new skills, new energies to the economy, and the importance of community. I feel like that there is a renewed appreciation for, you know, these are partly about democracy and these are partly about thriving civil society, but these are also partly about understanding what our economy needs to function, that we need rule of law, that we need trust.

• 51:53Kara Swisher?

  And your biggest worry?

• 51:54Speaker 04

  I guess my biggest worry is the dissolution of the safety net, which, you know, is, is one of the things we've been hammering on this whole discussion.

• 52:00Kara Swisher?

  Which leads to the anger part. Annie?

• 52:03Speaker 00

  Yeah, I'm really, really excited about the new cancer medications, GLP-1s, which are really improving a lot of people's lives. There's new biologics, there's new treatments for previously intractable conditions like cystic fibrosis, which is so exciting. I am terrified that we are pulling away the basic scientific funding that has made a lot of this possible. GLP-1s came in part from research on the HeLa monster. And this is precisely the sort of stuff that now Doge and the Trump administration wants to cut, right? When we're at this moment that, you know, because of CRISPR and other things that I do not understand, we seem like we might be able to actually really improve people's lives.

• 52:42Kara Swisher?

  And save costs.

• 52:43Speaker 00

  Yeah, exactly. And I wish that everybody had access to the medications. You know, these are really expensive. I wish everybody had access to the medications they need.

• 52:50Kara Swisher?

  Good. Claudia?

• 52:51Speaker 05

  Right, so mine is with the low hire, low fire labor market. First, the positive, the low fire. Layoff rates in aggregate are very low. So if you're a worker who has a job and really likes your job, is a good job, like, this is a good labor market. The flip side, the thing that does concern me is the hiring rates are really unusually low for a labor market that overall looks pretty good. And so this is an incredibly tough labor market for people coming into the labor market for the first time, trying to, you know, get back into labor market or stuck in a bad job. So like, I do worry about that half of it. Like, the hiring rates need to come up.

• 53:27Kara Swisher?

  Okay. All right. Thank you guys so much. I know we covered a lot of stuff. We were trying to get to a lot of stuff, but I really appreciate it. Thank you so much.

• 53:34Speaker 04

  Thank you.

• 53:35Speaker 05

  Great.

• 53:35Speaker 04

  Bye.

• 53:35Speaker 05

  Thank you.

• 53:36Kara Swisher?

  Bye.

• 53:43Kara Swisher?

  Today's show was produced by Michelle Aloy, Catherine Millsop, Megan Burney, Madeline LaPlante-Duby, and Kalen Lynch. Nishat Cora is Vox Media's executive producer of podcasts. Special thanks to Corinne Ruff, Rose Marie Ho, Dave Shaw, and Julia Sharp Levine. Our engineers are Fernando Aruda and Rick Kwan, and our theme music is by Track academics. If you're already following the show, you've figured out the best way to do capitalism. If not, you're in an economic doom loop. Go wherever you listen to podcasts, search for On with Kara Swisher and hit follow. Thanks for listening to On with Kara Swisher from Podium Media, New York Magazine, the Vox Media Podcast Network, and us. We'll be back on Monday with more.