Is This a Recession or Not?

Wouldn’t it be funny if we launched a podcast called “Optimist Economy” at the very moment the economy started to slide? Nice timing, us! In this bonus episode we dive into the data that has folks spooked. We also talk about if willy-nilly tariff policy (technical economic term there) is to blame, whether a recession is more like a wildfire or a hurricane, and how a recession might affect you. Also, who gets to declare, “Recession on!” Can we squeeze an ounce of optimism out of a recession episode? We try. You be the judge. Some of the stuff we talk about: GDP Now https://www.atlantafed.org/cqer/research/gdpnow The NBER’s Business Cycle Dating Committee https://www.nber.org/research/business-cycle-dating Economic News Releases from the Bureau of Labor Statistics https://www.bls.gov/bls/newsrels.htm#OEUS WSJ: The U. S. Economy Depends More Than Ever on Rich People https://www.wsj.com/economy/consumers/us-economy-strength-rich-spending-2c34a571?st=TdTTsq&reflink=desktopwebshare_permalink You can also find Optimist Economy at: [email protected] mailto:[email protected] TikTok https://www.tiktok.com/@optimist_economy YouTube https://www.youtube.com/@optimist_economy Instagram https://www.instagram.com/optimist_economy/

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

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• 0:39Speaker 02

  Hello and welcome to Optimist Economy. I'm Catherine. I'm Robin. And on this show, we believe the US economy can be better, and we talk about how to get there, one problem and solution at a time.

• 0:56Speaker 02

  We're talking about a big problem this week. Big problem this week, in a special episode, even though we only launched Yesterday. Last week. Yesterday. Okay, last week. We're already doing a special episode, different from our regular weekly episodes, where we could talk about something that's, I'd say, more time-sensitive or pressing than whatever topic we end up talking about in the pitch meeting, which this week is Recession. Recession. So I should explain a little bit of a journey I've had over the past couple of weeks, that in addition to being a podcaster, I am a writer on Bloomberg and labor economist expert slash talking head. And the past two weeks have been a whirlwind

• 1:39Speaker 02

  of media hits, of speaking to journalists and going on TV shows and being guests on other people's podcasts about recessions and this kind of palpable fear that's growing in the economy that we're heading for a recession. And wouldn't you know, I eventually came to the conclusion, I too have a podcast.

• 1:59Robin Rauzi?

  And that maybe we could talk about it on your podcast.

• 2:02Speaker 02

  And that we could talk about this thing that I'm an expert about that's pressing in the economy and it is on the front of a lot of people's minds. We could talk about it on the podcast that I host.

• 2:12Robin Rauzi?

  Pay yourself first, Catherine. Yeah.

• 2:14Speaker 02

  Pay yourself first. What matters is we got there. It was definitely one of those moments in life of if you're a Simpsons fan of like dental plan, Lisa needs braces.

• 2:22Speaker 04

  Dental plan. Lisa needs braces. Dental plan. Lisa needs braces. Dental plan.

• 2:28Speaker 02

  Just like kept going. But we're doing a special episode to talk about recessions and where they come from and if you should be scared right now. So I, I mean, I reckon I could start with why people are scared.

• 2:42Robin Rauzi?

  I also want to point out that I think people have been a little concerned since the election last year where there was so much talk about tariffs, right? That people were worried that aggressive tariffs were going to raise prices and a lot of the talk was about continuing inflation. But we moved into this recession talk pretty, pretty recently and not just because of political opposition, but because some things are really changing.

• 3:08Speaker 02

  Yes. So, quick primer on what is the economy? It's a very discreet definition. When we say the US economy, that it's growing, that it's shrinking, it's, yes, mood and vibes and your sentiment matters, but the actual economy is measured as a specific number. It's a dollar amount estimate of its size and it's made up of four things. It's just addition. C plus G plus I plus X sub N. C is consumption of goods and households. You're laughing? This is, that's four things.

• 3:41Robin Rauzi?

  You're doing four things and then you give me a formula like a map.

• 3:44Speaker 02

  C plus G plus I plus, it's C G I X. There's four things that make up the economy. They're added together. C is the consumption of households. G is the consumption of the government. I is the consumption of businesses, which we call investment, capital investment, and then X sub N is your net exports. So what households spend, what the government spends, what businesses spend, and then your net exports, that is the sum total of your economy.

• 4:09Robin Rauzi?

  Okay.

• 4:10Speaker 02

  Of those four things, the consumption of households is by far the biggest component. It's around sixty-five to seventy percent of our economy is everything that you and I buy from beds to houses to haircuts to cars to whatever.

• 4:26Robin Rauzi?

  Right, and this is when when people say the American consumer is the the basis of the US economy, that's what they're talking about. That it is the biggest of those four pieces.

• 4:35Speaker 02

  That is the biggest of those four pieces, and what people do matters most. This is why when consumer sentiment comes out, it has such a kind of big attraction and draw, because if consumers were spooked and pulled back on their spending, they wouldn't even have to have that many people do it to a large degree to actually reduce economic activity.

• 4:56Robin Rauzi?

  Right. Okay.

• 4:58Speaker 02

  All right, so what people talked about with tariffs after Trump won at the end of twenty twenty-four was that the effect that they would have on the economy would be on prices.

• 5:08Robin Rauzi?

  Right.

• 5:09Speaker 02

  But the tariffs that he announced were much bigger and aggressive and affected more countries than I think people realized. And so it's not that he's going to affect prices and people will pull back on spending. He's actually directly going to affect the size of the economy on this net export measure.

• 5:26Robin Rauzi?

  So probably then both.

• 5:28Speaker 02

  Well, it's going to affect both, but the predictions of economic decline are coming from exports. So a lot of economic data has a lot of really weird lags. So some things come out in almost in real time, some of them have like two-month lags. We measure economic growth in quarters. We're at the end of the first economic quarter, and we'll find out at the end of April how much the economy grew. But the Atlanta Fed has something called the GDP Now Cast, where they take all of the data as it becomes available in the economy and they put it into a prediction model of what the GDP forecast is going to be. Or what the GDP growth is going to be when we actually find the actual numbers. So it's a predictive model of the Fed's internal data and external data of what GDP is going to do.

• 6:14Speaker 02

  One of the reasons why people are so spooked about the economy is that the GDP now cast, once these tariffs kicked off in earnest, it went from a projected 2% growth to a projected 2% contraction in the economy, an actual decline in economic activity. That's not vibes, that's not bad sentiment or people being worried. That is our economy got smaller in the first quarter. And as we get closer to the end of the quarter, their prediction gets more and more accurate.

• 6:41Robin Rauzi?

  And it's March 24th as we're recording. So we're a week from the end of the quarter, is that right?

• 6:47Speaker 02

  Yes, and what tariffs are doing is, yeah, I mean, this is why their awful economic policy, you know, you put a surtax on any good coming in the country is one thing, but you've also picked a fight with the country that you export to. So it's not as if we only import things and we don't sell anything abroad. There are lots of American producers whose primary market is an export market. And so what tariffs are doing is kicking off this tit for tat trade war with our largest trading partners in which they are punishing our exporters and they're canceling their, basically the goods that we should be selling abroad, we're not selling abroad, and that is going to hurt our economy a ton.

• 7:30Robin Rauzi?

  Right.

• 7:32Speaker 02

  So that's where the fear is coming from. It's from the decline in economic activity that tariffs is causing in real time. Now, how much it'll actually decline the economy, we won't know until the end of April.

• 7:42Robin Rauzi?

  And that decline is just for the first quarter of this year? And that's, but that's on a projected annual?

• 7:50Speaker 02

  Yes. It's this funny thing we do to how we measure GDP is that we measure the quarterly growth at an annual rate.

• 8:00Speaker 02

  It's because we want to hit a target of about 2% to 3% GDP growth in a year. And so in the quarter, we just, you know, make the number an annual number. So if the economy grew in the first quarter or shrank, in this case, probably, this is how much it would shrink over a year. So it's a, it's 2% decline on an annual basis. It's not 2% in a single quarter.

• 8:24Robin Rauzi?

  Okay, that's a lot, and real fast.

• 8:26Speaker 02

  Yes, it switched on the 28th of February. And it has, it switched from being around 2.3% to negative. And then it's vacillated between negative 1.6 and 3%. And in the negative 1.6 to negative 3%, those are projected on an annual basis, which is just how we talk about GDP. One of the many ways economic statistics are obscured behind really unclear data and language that you'd have to have someone directly explain it to you to understand why we do that. So that's just yet another thing that we try to keep you from getting.

• 9:05Robin Rauzi?

  And I just also want to say that there's a lot, you know, it's not like there's good news coming out of all those other letters that you were naming, right? We've got very visible cutbacks in public spending or attempting to make cuts in, in public spending and government spending. And we've got a, a stock market that's been on the skids. And if you read that Wall Street Journal story about the top 10% of consumers really being the bulk of the consumer spending in the United States, you know, those are folks with money in the stock market who could easily also be even more spooked.

• 9:41Speaker 02

  I mean, it's, it's depends on how you want to look at it. For by, by a lot of metrics, Trump took office with one of the strongest economies a new president has ever been gifted. I mean, he had 4% unemployment and price growth, whether measured from consumer prices, personal consumption expenditures, or producer prices, they were all below 3%. This is exactly where you want an economy to be. It's strong, there's no risk of recession. You know, he has basically the best conditions for a new president because the economy is good, which not, not to, not to point out, but that was the exact conditions he had last time he was inaugurated too. I mean, he has inherited two extremely good economies. But the other, I mean, the other way of looking at January 2025 in the US economy is that we were on the brink.

• 10:26Speaker 02

  For so long, fighting inflation, that by all rights, we should have had a recession, but we didn't. But there were, there were certain weaknesses left over from that fight. I mean, there's precarity in the market that the unemployment rate didn't necessarily portray, like that the hiring rate has been at recession levels for about a year. And if you were employed, the economy is doing great. But if you were unemployed, the economy feels like it's in the middle of a recession. So there's, you could sell it.

• 10:54Robin Rauzi?

  Talk more about that, because I mean, I think that's the, the other thing that you were seeing months ago in the hiring data.

• 11:01Speaker 02

  All right. So the unemployment rate is 4%. Even if you only casually read the news, you would know, like, that's good.

• 11:07Robin Rauzi?

  That's good. Yeah.

• 11:08Speaker 02

  Yeah. But if I told you the hiring rate is 3.3%, you'd be like, well, that's nothing. You could have said 50. I don't know. It's not the number. The number means nothing. But what the number relatively means is that typically when the hiring rate is at the level it is right now, the unemployment rate is around 8% as opposed to 4. So we have seen a complete divorce of two things that should always trend together, that for the first time are not trending together, which is that unemployment hasn't increased, but hiring has basically fallen off a cliff.

• 11:42Robin Rauzi?

  And if, if the unemployment rate, typically if the unemployment rate's at 4%, what would you expect a hiring rate to be?

• 11:49Speaker 02

  North of 4. I mean, the, the labor market's always churning. Every month, no matter if the economy is in the best labor market you've ever seen, or the worst labor market you've ever seen, there's always unemployed people. There's always a share of people that are getting hired, and a set of people that are getting laid off. And what a recession tends to mean is that they just slow down or pick up in a certain way. But there's always a constant churn to the labor market. It's just, where is it starting to slow? Hiring slowing, the reason why it's so risky is like, you dump a half a million people into the unemployed from a set of layoffs, and you can spike the unemployment rate from 4% calm levels to 5%.

• 12:35Speaker 02

  Worrying levels, I mean, you could do that in three months.

• 12:37Robin Rauzi?

  Mm hmm.

• 12:38Speaker 02

  This is where a lot of the worry is coming from.

• 12:40Robin Rauzi?

  Right.

• 12:40Speaker 02

  Especially because none of the Department of Government Efficiency activities have shown up in the labor market data yet due to the timing of the survey. So there's two surveys that we use, one of businesses and one of households, to understand what's going on in the labor markets. And for both surveys, they don't ask you or your employer, like, how many people did you have working for you last month? They ask about a very specific week of the month, and it's the week of the 12th. So the problem there is that DOGE's activity kicked off the week of the 12th of February, and so nothing that DOGE has done has shown up in any of the data yet. But we also don't know if anything will show up.

• 13:25Speaker 02

  Payroll employment is exactly how it sounds. You have people on payroll. And for all the bluster and attention that has gone to what's happened to USAID or the Consumer Financial Protection Bureau, most of those people are still being paid, full time, on administrative leave. So you actually have to have mass firings to show up as a hit to payroll employment. All the people that are being paid to stay home and end, you know, government activity, they aren't laid off. So for all the attention that DOGE gets, it also isn't very transparent, and we don't we don't even really know how many people have lost their jobs versus have been sent home with full pay not to work. So that's another kind of huge uncertainty, is we don't know what the jobs report is

• 14:09Speaker 02

  going to look like. For the past year, we've probably been adding around 100,000 jobs a month, so.

• 14:18Robin Rauzi?

  It won't take much to wipe that out.

• 14:20Speaker 02

  It doesn't take much to wipe that out. That's right.

• 14:22Robin Rauzi?

  I mean, I was reading the UCLA Anderson forecast, and, you know, they were talking about the ripple effects through the state governments and local governments, that we could be looking at a million people laid off, and it could be the, like, the largest single layoff event in recent US history.

• 14:37Speaker 02

  Yes, the actual largest layoff event in US history is the pandemic, March of 2020. And the second largest layoff event in US history happened at the de-escalation of World War II. And I think it's September 1945.

• 14:51Robin Rauzi?

  Yeah.

• 14:51Speaker 02

  Massive. It's like one month where like-

• 14:53Robin Rauzi?

  You were building planes? We don't need that anymore.

• 14:55Speaker 02

  Yeah. Even in raw numbers, even though the economy was so much smaller in 1945, the single worst month of job loss, I didn't think anything would pass World War II because it was such a, such a large number.

• 15:05Robin Rauzi?

  Okay. There's a bunch of numbers coming out this week, too.

• 15:10Speaker 02

  Yeah. So here's, here's how the timing of this is gonna go in terms of bad news accumulating. Because I think even with all the worries we have now, we still don't have a bad data release. Like, we don't have in hand on a piece of paper, this was a really bad number. But if we get those, we're gonna get a lot of them over the next two months. So the first week of April, the first Friday in April, we'll get the jobs report. And that will show the first three or four weeks of Department of Government Efficiency activity, as well as any losses related with the early start of the tariffs.

• 15:46Robin Rauzi?

  I'm sorry, and the jobs report is just, is the unemployment report and the, and the jobs added?

• 15:50Speaker 02

  Yeah, it's, it's the, yeah, it's the unemployment rate.

• 15:53Robin Rauzi?

  Okay.

• 15:53Speaker 02

  Those are the headlines. I mean, I always hit sidebar. I always get so many people, like, they never focus on the data that matters to people. I'm like, y'all, the data release has about 2,000 numbers in it, but yes, the headline numbers are the unemployment rate and the number of jobs added.

• 16:06Robin Rauzi?

  Yeah.

• 16:06Speaker 02

  But I got one person on, I think it was on TikTok, they're like, you know, they should count the number of people that have two jobs. I'm like, they absolutely do. It comes out every month. This is the schedule. You're gonna have the first Friday in April, April 4th, you're gonna get a jobs report that could be weak because it's gonna reflect early tariffs and Department of Government Efficiency job costs. Then, within a couple of weeks, you're gonna start getting price reports, where the tariffs effect on producer prices and consumer prices, to the extent that they're starting to take hold in the economy, they are gonna start showing up in the first April report. And then at the end of April, we'll get an estimate of the first quarter's GDP, which,

• 16:48Speaker 02

  for the first time since the pandemic, is projected to be negative. Then throughout April and into May, we're gonna start getting Q1 earnings reports from public companies.

• 16:57Robin Rauzi?

  Right.

• 16:58Speaker 02

  This is also not going to be good because they're starting to feel the effects of tariffs. So even if their sales haven't gone down, their earnings can go down if they're eating the cost of tariffs before passing too much in prices on to consumers. So it's going to be very hard to have both a good price report and good earnings reports coming from these massive companies.

• 17:15Robin Rauzi?

  But they're also going to talk about their projections about what they see coming. And what we know is that the uncertainty is making businesses completely crazy. They don't know what to do, they don't know what to plan for.

• 17:26Speaker 02

  Yeah.

• 17:27Robin Rauzi?

  They don't know what to invest in, they don't know. And the result usually in that situation is they do nothing. Right? Especially not hire.

• 17:35Speaker 02

  Especially not hire. Oh, they're certainly not going to start hiring. And they might, you know, this is the thing, you have a bad earnings report and companies feel the pressure to like lay off 5% of people just to look like they're keeping a hold of their costs. Like it's just, no good decisions are made. And you know, and the kickoff to all of this is April 2nd is when Trump wants to launch a whole new round of tariffs on a bunch of other countries. So it's just, I see very few bright points from economic data for the next two months. That doesn't mean the economy is in a recession, but man, if you tank the mood and the confidence of household consumers, that is enough to push us into a recession.

• 18:16Speaker 02

  So I would have said, I would have said two months ago, like, y'all, we're fine. We beat back inflation, the economy is fine, like, we don't need to have a recession right now. And now I'm kind of, I gotta say, the thing that worries me the absolute, absolute most is that Trump is already talking about owning this recession. Like, he said, pain is necessary. I have never heard a president say, pain is necessary.

• 18:47Robin Rauzi?

  Yeah, I mean, they're making no bones about it, that this is an attempt to just completely overhaul the entire US economy.

• 18:56Robin Rauzi?

  So they're not, it's not like they're underselling it, but it's also not like they're doing it on a, on a long runway, right? Which gives businesses and, and individuals time to plan and adjust and...

• 19:07Speaker 02

  Also, none of what he's doing is economically beneficial or necessary. Cutting off our trading partners and starting trade wars with people who we have good political relations is not good. It's not, we're not getting anything out of this. I mean, the silence of the business community is really interesting to me. I'm like, so you guys really will sell everything you own in the world for a lower corporate tax rate? But like, when are you gonna get upset by how this is affecting your bottom line? Because it certainly is.

• 19:33Robin Rauzi?

  I mean, what is it gonna do to agriculture? I mean, agriculture also already taking the hit from the immigration stances and not being able to get the labor that they need. But huge amounts of exports are agricultural products.

• 19:45Speaker 02

  All right, so let's say Trump announces tariffs on Europe on April 2nd. I mean, he's told them that it's coming. He's gonna hit them with some arbitrary number that's not derived from any economic reasoning. I mean, it's not as if, this is what industrial policy is supposed to look like. You hear from wine producers in Northern California, like Napa, Sonoma, whatever else is up there, I don't know if anything else is up there. What goes on in California, Robin?

• 20:14Robin Rauzi?

  They do. That'd be fun.

• 20:16Speaker 02

  Okay, you hear from California wine producers that France is being unfair and that the US needs to do something because France is being unfair in the export market, or they're flooding the market with champagne, which to me, I'm like, this sounds like a great problem. But like, Target's not on the phone saying, "God, I wish we could have tariffs," right? Like, nobody's asking for this and they're getting it anyway. And so you can bet that France is sitting there on April 2nd and they're, they've got a little list in their mind and they're like, "Okay, he went through with it." You know, and they're like, you know, you can imagine like the almost cartoonish scroll that they like. I imagine France has like a scroll and they're like, "Uh-uh."

• 20:58Speaker 02

  Roll down their scroll and they're like, and here's our retaliatory tariffs.

• 21:01Robin Rauzi?

  Mm hmm. So you've talked a little bit about how all these numbers are coming out in the next month. But we haven't, we haven't actually said we're in a recession, right? Like, when do we do that? When do we know that? And really, do we feel like we're in a recession long before we actually get diagnosed with a recession?

• 21:18Speaker 02

  Yeah, ding ding ding. Yeah, exactly. So recessions are officially declared by the National Bureau of Economic Research Business Cycle Dating Committee, which is a group of frankly, self-appointed economists who monitor the activity, all economic activity in the US, and they determine if there's been a recession. There's a lot of like, interesting things about this Business Cycle Dating Committee. First off, it's not a government agency, no government accountability, which means if you're catching my drift or picking up what I'm putting down, Trump can't fire these people. He has no leverage over them.

• 21:55Robin Rauzi?

  Oh.

• 21:55Speaker 02

  So this is just a group of independent academic economists who look at the, like, what is he gonna do?

• 22:01Robin Rauzi?

  Yeah.

• 22:01Speaker 02

  Nothing. It's not a government agency. So.

• 22:04Robin Rauzi?

  No Zoom meetings for you people.

• 22:05Speaker 02

  Yeah. Yeah. You actually have to grade papers now, like executive order.

• 22:11Speaker 02

  That would probably devastate them. But, but this group of economists at the National Bureau of Economic Research, they're affiliated with a bunch of different schools, but this is a group that comes together. They monitor economic activity and then they officially declare a recession and it's always backdated. So the 2007 to 2009 recession, which I call the Great Recession, they declared it in October of 08 that it started in December of 07. So there's always daylight between when the recession started, like when economic activity declined versus when they tell us we are officially in it. And the way that I explain it is like, how do you know when you've had a bad week?

• 22:51Robin Rauzi?

  Yeah.

• 22:52Speaker 02

  Monday morning, like missed the bus, someone sideswiped my car, a bird pooped on me on the way into the office, like my boss was there and he's terrible. And he was in one of his moods. It's a terrible, like, Monday can be bad, but it's not like at noon on Monday, you're like, this is the worst week. And it's like, hang on, drama queen, it's Monday. Like, you gotta give it time. And the reason why they're so measured about this is that they don't want every blip to become a recession because recessions have a bit of a self accumulating process. So they're very much like, okay, well, that was Monday, no good. But let's see how Tuesday, Wednesday and Thursday unfold. And they almost always wait till Friday before they're like, okay, this week sucks.

• 23:34Robin Rauzi?

  Definitely this week was.

• 23:34Speaker 02

  Definitely this week was a loser. It's official, this week sucks.

• 23:38Robin Rauzi?

  In the case of the Great Recession, you sound, it sounds like three quarters that they waited until.

• 23:42Speaker 02

  Yeah, and that one was, I think, was one where it could have gone either way. The data of the start of the recession through the start of 2008, I mean, there were some, you know, unemployment was ticking up, kind of like it is now. Hiring was ticking down, kind of like it is now. The stock market had some measured volatility, kind of like it is now. And then you had the financial crisis.

• 24:06Robin Rauzi?

  Right.

• 24:07Speaker 02

  And so, once the financial crisis hit, it was just a matter of deciding when the decline in economic activity began. So not when the decline in economic activity reached its peak, but when did the decline begin? So I think, based on the economic data we have, the reason why people are so antsy right now is that March is going to give off potentially.

• 24:30Robin Rauzi?

  Economic data, that's.

• 24:31Speaker 02

  A bunch of economic data that would say this is, they're going to tell us.

• 24:35Robin Rauzi?

  This might be the beginning.

• 24:36Speaker 02

  They're going to tell us at the end of summer, like, yep, it was March. If the data gets bad enough, they'll tell us sooner. I mean, for the COVID pandemic recession, that was a two month recession. They were like, okay, so the economy shed 15 million jobs in March, but they did not wait until November to be like, so yeah, it was definitely a recession. Like, yeah, we all knew, they all knew, and they told us quickly.

• 24:57Robin Rauzi?

  Well, and that's a little different, I think, from where we are now, right? Which is, like, I, this, this moment to me feels a lot like I remember 2007 feeling when, you know, I was, I was working, but I knew that in the industry I was in, there were layoffs coming, and there had been layoffs, and. I thought, okay, it's time to like, really figure out, do I actually need to have this Netflix subscription or whatever? And I, and I, I did very deliberately cut a lot of my own spending and saved a lot of money because I really didn't know what was going to come in terms of my, my job.

• 25:32Speaker 02

  Yeah.

• 25:32Robin Rauzi?

  And, you know, that's a little bit what this moment feels like to me. And I'm, I'm, I'm guessing I'm not alone.

• 25:39Speaker 02

  No, I, I mean, I was on MSNBC this morning.

• 25:43Robin Rauzi?

  Early.

• 25:44Speaker 02

  Early this morning. I'm still grumpy about it. I'm in a chair at 6:05 getting hair and makeup done because network, network, they make you do hair and makeup. So I'm sitting there with like curlers in my hair and I make the joke I always make, which is you don't have to try that hard. I'm an economist. Like really, nobody's expecting me to look that good if it says economist under my name. And she's like, oh my God, you're an economist? So is a recession coming? Do I need to like, stop spending money on the fun shit I like spending money on? And I was like, oh my God, oh, we gotta.

• 26:18Speaker 02

  It's a great question. And I think it's part of a broader question of how do recessions affect you person?

• 26:24Robin Rauzi?

  Yeah.

• 26:24Speaker 02

  Person in the economy. Are you supposed to do something in recessions? Well, there's nothing that you're, you have to do or supposed to do. During recessions, there is a heightened risk, especially at the start of the recession for layoff. And most people associate recessions as a time when a lot of people lose their job. But that's not true. Recessions are actually a time when it gets really hard to find a job. The spike in layoffs that kind of kick off a recession don't last for that long. So you'll maybe have three, possibly six months where layoffs are higher than they normally are. But getting all of those people out of unemployment takes a really long time. And what characterizes recessions

• 27:08Speaker 02

  is it taking a long time to find a job.

• 27:11Robin Rauzi?

  Mm hmm.

• 27:11Speaker 02

  So.

• 27:12Robin Rauzi?

  But what you were saying about hiring data suggests that that's already the case.

• 27:15Speaker 02

  Yes, right. Which is why a recession right now is like, it's like kindling. You just throw a match down and it could light really quickly because we typically, I mean, hiring slows down leading up to recessions, but not. Not this bad.

• 27:27Robin Rauzi?

  Mm hmm.

• 27:28Speaker 02

  But, you know, you person in the economy, I mean, the thing no one really talks about in recessions is that if you don't lose your job, you're probably fine. If you don't lose your job, or your partner doesn't lose their job, you're fine. Because your income hasn't declined. What happens in recession is you have a large mass of people whose income has declined, and they have a drastic reduction in spending. And so, your posture as like, person towards recession is, how likely do you think it is that you could lose your job?

• 27:57Robin Rauzi?

  Mm hmm.

• 27:57Speaker 02

  Arguably, you might not know. You might not have a great sense of it. And so, a lot of people, either because they don't have a great sense of it, or because they're just really scared either way, pull back their spending. And in the months leading up to recessions, you see belt tightening, people cancelling extra activities, maybe I won't go on this vacation, maybe I won't go to this concert, I'm going to put more money into savings, pay off my credit card, and do all those things. But, you know, funnily enough, all that stuff does pull back economic activity. So, some of the decline in household consumption that you see in recessions are the households that are directly affected by layoff and job loss and unemployment. But some of the decline is just other people afraid of layoff and job loss and unemployment,

• 28:42Speaker 02

  and they pull back their spending some, too. But, we don't say this part out loud, but a lot of people will go through recessions totally fine and unaffected. And in fact, upwards of 90% of people will go through a recession totally fine and unaffected. Especially-

• 28:57Robin Rauzi?

  90%?

• 28:58Speaker 02

  I mean, it's rare for unemployment to get to 10%.

• 29:01Robin Rauzi?

  Yeah.

• 29:01Speaker 02

  And not everybody in the economy works. I mean, even if you assume that everyone unemployed has a partner that's affected, you can get to like, maybe 10%. It's just they're so acutely affected. And this is what makes recession so cruel, is that some people will be fine, and other people will be, I mean, just lives shattered.

• 29:20Robin Rauzi?

  Yeah, I mean, we saw that in the, in the Great Recession, and, and I guess people think of it as a housing crisis, which it was, but the recession sort of predated the housing crisis to us, to an extent.

• 29:33Speaker 02

  Uh, did the Great Recession predate the housing crisis? So, it was, it was a slow-moving dumpster fire that crashed into a gasoline station, is how I would put it.

• 29:47Robin Rauzi?

  Sloping dumpster fire, like the dumpster is moving.

• 29:51Speaker 02

  There's a dumpster on fire in a flood and it hits a gas pump. Like, that was the Great Recession. Now, y'all, these are all technical terms. And so if you need, if you need help parsing this, you know, you just send us an email, [email protected] of like,

• 30:06Robin Rauzi?

  I will come up with more metaphors for you.

• 30:08Speaker 02

  When does the economy classify as dumpster fire in a flood that heads towards a gas station? This and more on the show to make you feel good about the economy. Yeah, recession episode is tough for us because, I mean, the optimism here comes from a almost mean kind of self-preservation of like, well, if you don't lose your job, you're fine. But that's, that's mostly true. I will say, everybody is affected by a recession because the slowdown of the labor market's churn can hit you in ways that you don't see. So it can hit you in ways like part of wage growth that a person experiences over their lifetime comes from job hopping.

• 30:44Robin Rauzi?

  Yeah.

• 30:44Speaker 02

  And if you can't hop jobs because the economy slows down, that slows down your wage growth. And there's even these like really devastating studies that simply graduating from high school or college during a bad economy will reduce your potential wage growth for at least 10 years, on average for the group. And it's not just because some people in the group couldn't find a job, like the class of, I mean, no class in US history has probably had it worse than the class of 2009 and the class of 2020. But it wasn't just that there were people in the class of 2009 and 2020 who couldn't find jobs. Everybody who, even if they found a job, were affected by just how slow the labor

• 31:29Speaker 02

  market was creating wages and creating opportunities for you, young person, to learn. I mean, I think the real optimism of recessions are they end, we recover from them, and we move on.

• 31:41Robin Rauzi?

  Well, are they necessary?

• 31:42Speaker 02

  No, they're not necessary at all. They happen, there's a slowdown in economic activity, but they're not necessary.

• 31:49Robin Rauzi?

  Are they unavoidable?

• 31:50Speaker 02

  We live in a capitalist economy that has business cycles. And so I would say recession's always coming because the, we will have a recovery, expansion, recession, recovery, expansion, recession. We go through this cycle. But the last You know, 25 years have seen, even the last 50 years, you've seen a real slowdown of that process. So the length of the business cycle expansion has gotten longer. So it's not that we can avoid recessions, but we can and mostly do try as hard as we can to avoid them because it does inflict pain and it concentrates that pain on on job losers in the economy. But you know, when businesses close, I mean, it's a it's a hard time. But

• 32:32Speaker 02

  I mean, the good news is like, is a US economy. It's not like if you lose your job, that means you never get to work again. Or if your business folds in a recession, no one will ever let you start a new one. I mean, we we are an economy that is always churning. And you can be like thrown out, but that doesn't mean you have to stay out. And in fact, the our economy does tend to bring people back in pretty quickly.

• 32:54Robin Rauzi?

  To go back to your good week, bad week, you know, metaphor, is there a point at which we're going to be at the point of no return on a recession? Do you have a sense of when that? I mean, it's hard because of the the policy. Let's just say the policy environment is very dynamic right now.

• 33:08Speaker 02

  Oh, my God. Since the former journalist, I probably had to speak to both sides of an issue.

• 33:16Robin Rauzi?

  This woman, you said to me yesterday, I thought this was great. There's an app called WatchDuty, which if you're tracking fires, it's a great little app if you're if you're in a natural disaster and they have a staff of people and it shows you the fires all over the, say, Southern California, where I happen to live. And she said, opening New York Times right now is like watch, it's like opening WatchDuty, you know? How close is that? How close is that one?

• 33:43Speaker 02

  Yeah, I mean, I'm a Gulf girl. So I'm like, oh, hurricanes, you tend to have like an eight day notice. Like, here could be coming. Like, you're just watching the hurricane get closer and closer. And it's just a question of when it's going to make landfall, and if it'll get stronger or weaker when it does.

• 33:58Robin Rauzi?

  Yeah. So is this a fire? Or is this a firestorm? Or is it a hurricane? And when's it going to make landfall?

• 34:05Speaker 02

  Just want to optimistic economy to decide either way, if we think recessions are fires or hurricanes, as we endeavor to make people feel empowered in the economy. Damn it, recessions are hard. In looking back, this will be hilarious to me if we start a podcast called Optimist Economy, and they go back and date the recession to starting this month.

• 34:23Robin Rauzi?

  Yeah.

• 34:24Speaker 02

  That'll be like, we are good at this.

• 34:27Robin Rauzi?

  And change our logo to be like.

• 34:33Speaker 02

  I know. Oh, man. Oh, man. So, yeah, so the reason why there's daylight between having a bad Monday and being in a recession is because this gives policymakers a chance to stop a recession before it comes. And we all experienced this after inflation, that like, prices hit really high levels and you saw the Fed do interest rate policy that was meant to hurt the economy. Biden basically passed his industrial policy agenda, inflation took off, and he had to completely abandon his domestic policy agenda. And there was no more minimum wage talk, no more childcare talk, no more paid leave talk, because it was just a matter of tightening belt and hoping a recession didn't come. And you make these policy changes in order

• 35:17Speaker 02

  to keep the economy from slipping into a recession. And this is the good news, right? Recession's tell us that they're coming. I mean, the pandemic recession was an exception because it was caused by a truly external shock that was non-economic in nature, but economic in consequences. Otherwise, recessions tell us, like, I'm on my way. They're like the, they're like the, oh, you know what? They're like the millennial daughter texting the mom as they go through a flight to wherever they're going. Like, hey, Mom, I'm on my way to the airport. Got to the airport. I hate security. Just at the gate. I got a beer. I'm so, I'm so bad. Like, hey, Mom, in my seat, there's a tall person next to me. I mean, it's just like a constant telegraphing of whereabouts from millennial children to

• 35:59Speaker 02

  their millennial, to their boomer parents of, here's where I am now. That is the economy leading up to a recession. So, we do have lots of warning. In this, another metaphor about the economy, our boomer parents have their phone on airplane mode. Like, they're just not listening. And maybe that's not true. I mean, I feel like Trump is getting briefings that the econ, the economic data is looking bad, and that's why they're starting to own a recession. But, I don't know, he doesn't have points of leverage. He's a lame duck president who promised people he would destroy the economy and is actively doing so. You know, there's not a lot of points of leverage for him to do the right thing. Your member of Congress, on the other hand, is going to need a job, and is will be asking

• 36:44Speaker 02

  for you for a job in about a year. To five. So that is the point of leverage is for Congress to do something.

• 36:54Robin Rauzi?

  Yeah.

• 36:55Speaker 02

  Which, Jesus, if this show has optimists in the title, that is not going to be where it comes from for a lot of people. But I will say, like, you know, for all the ills of what is going on in Washington, where these 535 well-intentioned clowns show up and have a hard time doing the job they applied for, we've never had a recession, for example, since World War II, in which Congress did not intervene and prop up unemployment insurance.

• 37:22Robin Rauzi?

  Mm hmm.

• 37:23Speaker 02

  It's never happened. And in fact, the intervention has only gotten bigger and bigger over time. So which other episode on unemployment, we'll get there. But there are things that that Congress can and will do when the economy goes south. And even for the lack of faith you have in Congress right now, I don't think they actually want to do a bad job on the economy. In my sense, from talking to journalists and, you know, if I could do some DC goss, my DC goss would be, Congress is already incredibly mad about the tariffs because they're getting constituent calls saying, like, why does this cost this much? So I, you know, I think the tenor of the administration is, we're going to crash the economy because we need to to live

• 38:06Speaker 02

  through Trump's vision of a glorious American economy that is impossible to construct. But that is not a unified vision or message. And there are a lot of cracks in the armor already.

• 38:18Robin Rauzi?

  Can I ask you, I mean, again, doubling down on on our optimism? Can I?

• 38:23Speaker 02

  Yeah.

• 38:24Robin Rauzi?

  Because I'm not the, I don't have to be the economist or the optimist. I'm frankly worried about stagflation, child of the 70s, you know, which is where we've got things going, prices going up because of these tariffs, which is inflation, and a stagnant economy, which is stagnation. I mean, that that seems kind of like the direction we're headed.

• 38:45Speaker 02

  Yes.

• 38:46Robin Rauzi?

  Okay. Thank you for that. Thank you for that affirmation.

• 38:50Speaker 02

  Yes. Well, I'm here to be, I'm here to be positive. You nailed it. Yeah, that is, that is a massive worry. So I think the difference is that it would be potentially short-lived. I mean, this is what interest rate policy had been trying to accomplish for a year and a half. The one way to very easily reduce price pressure is by reducing demand. What makes stagflation stagflation is that even as demand falls, prices are still going up because that price increase was truly due to supply issues. And we have a lot of flavors of that because we could have price increases from supply issues generated by tariffs.

• 39:26Robin Rauzi?

  Tariffs, right.

• 39:27Speaker 02

  But unlike oil price shocks in the 1970s, tariffs as a policy we could turn off like that. You know, stagflation got us into a problem of, it showed some true weaknesses in our economy and our approach to macroeconomic policy. And at the end of the day, we were really dependent on foreign oil. Different now in that we are kind of creating our own supply shock, but that means we have the ability to end it really quickly. So I mean, even if Trump was like, these tariffs are beautiful and we're not going to end them, you know, this still comes back to Congress, writes a law that says all tariffs are paused until the economy recovers and then at which point we'll, we'll send them back in.

• 40:09Speaker 02

  And yeah, I mean, there's very little that Congress can tell the president to do that he's not allowed to do when they actually have a backbone.

• 40:16Robin Rauzi?

  Well, and a super majority, right? I mean, he can veto a lot of stuff, too.

• 40:20Speaker 02

  He can veto a lot of stuff, too. So they'd have to really put their back into it. But, you know, I mean, I think people feel very down on their ability to do that, but you have pressure over them that he doesn't. Yes, things are bad now and most of us will be fine and most of us will be very angry. And an election and power transition that was already, just given how presidents and midterm elections work in the US, was probably not going to go his way, you know, will go his way even less so. So it's, it's, it's hard to be patient when so much is being thrown at you with the economy. And I understand that, but you can't jump to despair.

• 41:04Speaker 02

  The US economy is still the biggest and strongest and best in the world. And no matter what the recession we've been through, we have always recovered and kept growing. And I actually have some reason to think that our labor market recovery this time would be a little faster.

• 41:21Robin Rauzi?

  Faster than 2008, nine, which was really a slog to get out of.

• 41:27Speaker 02

  Yeah, it was like seven years long. Long-term demographic changes in terms of the baby boomers retiring is starting to put downward pressure on labor supply. Does that mean anything to you when I said that sentence out loud?

• 41:41Robin Rauzi?

  I mean, I think it means there's fewer workers in the, in the workforce and therefore to fill the jobs, that shifts a little bit of the power towards the worker.

• 41:50Speaker 02

  That is exactly right. I didn't know how like speaky, he comes speaky, I got, but yeah, I mean, there was, I think, roughly 70 million baby boomers and the labor market during a recession looked really different when they were 25 as opposed to 75. Well, the youngest boomer is 61 this year. So our prime age population is just a smaller share of the overall population, which means that our pool of available workers, it's not this like near infinite pool that the boomers provided when they were young. And so I think that that puts a lot of pressure into workers' favor when the economy is good. And hopefully, like coming out of the pandemic, it, it portends economic recoveries that are faster for the labor market as opposed to slower. That's the hope.

• 42:34Robin Rauzi?

  That's, no, it's the best news I've had.

• 42:38Robin Rauzi?

  Four days.

• 42:39Speaker 02

  Oh, good.

• 42:40Robin Rauzi?

  Reading up on recessions, yeah.

• 42:41Speaker 02

  Yeah, so, you know, labor market, the labor force participation rate, we measure it two ways. We measure it for the 16 and older population, because that's the population that's legally eligible to work. And then we measure it for the prime age population, that really nice term that judges you. And right now-

• 43:00Robin Rauzi?

  You're just saying that because I'm sliding out.

• 43:03Speaker 02

  Right now, prime age labor force participation is at a historic high. And overall, labor force participation is at like a 20 year low and it's falling every year. So as the boomers leave, overall labor force participation falls. But prime age labor force participation is at a peak. Like we, we've never really worked in the prime age as much as we do now. They're just a smaller set. And so these dynamics in the labor market will change how the recovery unfolds.

• 43:29Robin Rauzi?

  Which suggests that there's a lot of opportunity out there just based on those macro demographic shifts.

• 43:36Speaker 02

  Yeah.

• 43:36Robin Rauzi?

  Okay.

• 43:39Speaker 02

  So I feel like recessions are formative to people's economic lives.

• 43:47Robin Rauzi?

  Yeah.

• 43:48Speaker 02

  We've been through the pandemic recession, but that probably left a lot of the taste that, that left in people's mouths came from the virus and less so the economy. Like the vi, I think like people will say like that, all those bad times happened because of the virus. And not, and the virus was like the guilty party as opposed to the economy itself. Or like the economy was struggling, but it was still the virus that was the guilty party. We haven't had a recession recession since the great recession. I mean, the pandemic had a recession, but I think it's just a different.

• 44:18Robin Rauzi?

  Yeah, the dynamic was, yeah, very different.

• 44:21Speaker 02

  Dynamic was very different and.

• 44:23Robin Rauzi?

  It was so sudden.

• 44:24Speaker 02

  It was so sudden.

• 44:25Robin Rauzi?

  Yeah.

• 44:26Speaker 02

  I gotta tell you, it was the harshest return from maternity leave that you could possibly imagine. Especially if you had in order for your mental health checked out of the news.

• 44:38Robin Rauzi?

  Welcome back.

• 44:38Speaker 02

  I showed up to work, I just remember the office was completely empty. And I was like, where is everybody? And they were like, what the hell are you doing here? Because, because my office had a COVID scare before the actual shutdowns.

• 44:51Robin Rauzi?

  Oh.

• 44:51Speaker 02

  And so I went in not knowing that there had been an email saying there's been an exposure or nobody come to work. And I was like, but I'm here with my baby, so.

• 45:02Speaker 02

  And we need to get out of the house.

• 45:05Robin Rauzi?

  Sorry, that won't be happening for the next nine to 18 months.

• 45:10Speaker 02

  Yeah, I talked to my therapist about it a lot, so we don't need to recreate that here. That's what I pay her for.

• 45:17Speaker 02

  This is, I think, we wanted to do this special episode to talk about recessions to, I think, tell you straight that it's not great, but that doesn't, it doesn't necessarily mean disaster for everyone in the economy. And even for the people who've experienced job disruptions, it doesn't necessarily mean disaster for them because you have the greatest ice up your sleeve, which is the strongest and biggest economy in the history of the world. That does churn out a lot of jobs and a lot of opportunities. And setbacks happen to a lot of people outside of recessions. And maybe it's just a good reminder to be kinder to people who are facing a hard time because we tend to be more sympathetic when the economy is bad than when the economy is good.

• 45:58Robin Rauzi?

  Yeah.

• 46:00Robin Rauzi?

  I think that's a good note to end on.

• 46:01Speaker 02

  I think that's a good note to end on too.

• 46:02Robin Rauzi?

  That's why I'm not talking anymore.

• 46:05Speaker 02

  And typically, the show ends when Robin looks at me blankly and says, I don't want to talk anymore. And we've reached that point.

• 46:16Speaker 02

  I, of course, am five days away from that point. So, since this is a special episode, we just, we're gonna go right to the outro.

• 46:24Robin Rauzi?

  Executive order, no recessions.

• 46:26Speaker 02

  Executive orders, try to be better about recessions. But my spiritual sponsor for the week is good counselors and mental health professionals that when you need them, they are there. We go to the doctor when we get sick and we go to the counselor when her head gets sick. And I'm very grateful for mine, so my spiritual sponsor for the week is good therapy.

• 46:49Robin Rauzi?

  Nice. My spiritual sponsor for the week is friends and families with pickup trucks. The only thing better than a friend with a boat is a friend with a pickup truck when you need it.

• 47:02Speaker 02

  Do you know I drove a pickup all through high school?

• 47:05Robin Rauzi?

  I'm not surprised.

• 47:07Speaker 02

  Yeah, oh, is this Chevy?

• 47:08Robin Rauzi?

  Oh, no, I do know that.

• 47:09Speaker 02

  Standard. It was blue, fully unloaded, didn't even have automatic windows. It was a nightmare to park. A truck is the most, one of the most useful tools in this economy is a truck when you need it.

• 47:24Robin Rauzi?

  Exactly.

• 47:28Speaker 02

  Very much on this show, we would like to thank our producer, Sophie, and we will snap her out. Thank you for making us feel confident and concise when sometimes we're neither.

• 47:39Robin Rauzi?

  Most of the time, we're neither.

• 47:41Speaker 02

  Most of the time. If I'm being honest, she saves us.