00:00Your view has been that the U.S. economy will avoid a recession, but that it will be close or a close call.
00:07What's the variable that could tip us into the recession?
00:11And in the next breath, what's really keeping us afloat?
00:15Layoffs. I mean, I think the firewall between the soft economy that appears to be weakening in recession is that businesses at this point have not laid off workers.
00:26They've done everything else but that. They've stopped hiring, so hiring rates are very low.
00:30They've cut back hours worked. The job growth has come pretty much to a standstill, except for a couple sectors like health care and education and parts of government.
00:43So the last thing they'll do is lay off workers. And I think they're very loathe to do that.
00:49They've been through most businesses have been through some pretty severe labor shortages since even before the pandemic.
00:55And I don't think they want to get wrong-footed, particularly in the context of immigration policy, which has a lot of immigrants leaving the labor force and not working.
01:04So I think, you know, I think the key here is layoffs.
01:09They're low, and as long as that's the case, we'll avoid recession.
01:12That's kind of my baseline, but, you know, it's a very tenuous kind of situation.
01:17And if we see any pullback in consumer spending, you know, I do think those layoffs will begin and will be in recession.
01:24So it's going to be very, very close. But that's the key variable. It's layoffs.
01:28Are you getting any signals that we could be close to that?
01:31Yeah. I mean, I think everything, it's really, you know, American consumers have really kind of are now very cautious.
01:43I mean, if you go back over the period from the end of the pandemic up until the end of last year, consumers were out spending with, you know, a fair amount of gusto.
01:52Spending growth was strong and very consistent.
01:54Listen, since the beginning of the year, consumer spending has gone flat.
01:59Now, flat consumer spending, I think, isn't enough to push businesses to start laying off workers.
02:05But if, you know, the tariff price increases start to kick in, undermine real incomes and purchasing power,
02:11and consumers actually do start to pull back on their spending even a little bit, that's when businesses may decide,
02:16hey, you know, look, we're going to have to reduce payrolls. We're going to lay off some workers.
02:20And the thing about layoffs that's a bit disconcerting is, you know, once one company in an industry lays off,
02:27you tend to see all the other companies in that industry lay off as well.
02:31And you can go from no layoffs to a lot of layoffs pretty quickly.
02:35And, you know, I think we're right on the edge here.
02:39You know, hopefully American consumers hang tough, continue to do their thing, don't pull back, and, you know, we'll avoid that downturn.
02:45But if they do pull back even a little bit and businesses respond by laying off,
02:49you get into that kind of self-reinforcing vicious cycle called a recession.
