Moody's Analytics Chief Economist Mark Zandi on the US Economy

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27:03I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Mark Zandi. He's chief economist of Moody's Analytics. Previously, he co-founded Economy.com and hosts the Inside Economics podcast. I bet you say that to all the economists. Everybody is my extra special guest. I get grief about it. Because once I painted myself into that corner, hey, my ordinary guest is this bum. Let's talk about your Moody's experience. We talked earlier about your warnings on housing and home financing and what ended up happening with subprime securitization.

27:44Moody's was one of the biggest rating agencies. I criticized them in Bailout Nation. Tell us what it was like when you joined the firm in 05 and you're wagging a finger about these sort of things. Did you get any sort of pushback? What was it like stepping into a firm that indirectly was a focus of some of your analytical critiques? Yeah, I got pushback. You did? I did, yeah. I mean, I wrote a paper on the subprime mortgage space and did everything but say, you know, these securities should be downgraded. house price declines, credit risk, defaults, foreclosure. These are the losses. But I didn't take it with the next step and say, okay, what does this mean for ratings?

28:29But I wrote that paper and it went to the CEO, a great guy, and the CEO - CEO of Analytics or the CEO of Moody's? Moody's. Full. Full Moody's. Right. And this, of course, I just had sold my company to them. So this is all brand new. He didn't, who is this guy? What's he doing? Zandy. Zandy. That's the back of the alphabet. We never get to his stuff. And he goes, why is he talking about subprime mortgage? What does that have to do about the economy? And at the time, that was a reasonable question. The best thing that ever happened, Bernanke gave a speech called Subprime Mortgage. And remember in that speech, he said, don't worry, this is not a problem.

29:08But because he wrote that speech, I could send it to the CEO. I said, look, this is why I'm talking about it. Right. The head of the Fed is talking about it. I should be sure he could talk. What was he, vice chair? or just a governor back then? Or was that his chairman? He was chair, I think, at the time. He was definitely chair. To the CEO's credit, he said, okay, you publish it. And it's the best thing that ever happened to, well, one of the best things that happened to Moody is because when the Financial Inquiry Commission, you remember the Financial Inquiry Commission? Sure, FCIC, absolutely.

29:38And I have that book. It's like this thick sitting on a shelf. Oh, yeah, yeah, yeah. I testified. I was the first panel of those panelists. Oh, really? Yeah. Amazing. And, of course, the CEO was a later panel with Warren Buffett. Warren Buffett is a shareholder in Moody's. I think he still is a big shareholder. The lawmakers were questioning them, and the CEO could say, hey, look, here's the study. Hey, can I tell you something? A little self-awareness. So that – yeah, I've been there for 20 years. I love Moody's. But that really helped a lot, right? In every respect, it helped my credibility.

30:16Helped the company's credibility. Yeah, helped the companies. Established a set of ground rules that I'm able to write about, think about, talk about anything that I think is important about the economy. All that was established in that point. Now, that's getting tested at different points in time as we move along here. And we're in a trying time now, but that was very, very important to my successful stay at Moody's for 20 years. I wish I could remember who wrote a criticism in response to the Bernanke speech about subprime, because the line was, subprime is contained. Yeah. And the response, it could have been Alan Abelson and Barron's.

30:55It could have been James Grant. It could have been Josh Rosner and Chris Whalen. But it was, yes, subprime is contained to planet Earth. The rest of the solar system is safe. And it was one of those lines where, damn, I wish I wrote that. I might have been Abelson or Grant. That sounds like a Jim Grant kind of line. Right? It very much does. It's sort of dry. Is he still writing, Jim Grant? I think so. Yeah. We kind of lost track. Yeah. It happens, especially in this era of Substack, where your inbox is just overflowed with stuff. So you got some pushback, but they cleared it. I got to ask, what was your experience like at Moody's during the great financial crisis?

31:37It had to be 24-7 work plus terrifying everything. Oh, it was an amazing – scary. I can remember a few scary – real scary moments in my mind when I got a call from a CEO of a major retailer saying that if we don't do something, he's going to not be able to make payroll. And I'm thinking to myself, he's telling me this. We've got a real problem. Well, he wants you to tell people in D.C. Yeah, that's exactly what it was. That was exactly what it was. Didn't the Bush administration, I don't remember if it was Hank Paulson or Bernanke, have conversations? Maybe it was the CEO of Ford or GM. Hey, we have money, but our credit facility is frozen.

32:25We can't get our money to make payroll. Right. Well, there was so many things going on. Remember, this commercial paper market had frozen, completely frozen. And of course, that's key to making payroll for a lot of these companies. I have a buddy who was on a derivatives trading desk, and he always pushes back when I use the word frozen. He's like, hey, I don't know what you're talking about. We were trading billions of dollars a day in paper. It was just discounted 30%, 40%, 50%. So there was liquidity, but there was a haircut involved. Well, and also just trying to find out, was it 30 % or was it 50 % or was it 75 %?

33:00You don't know. Yeah, you don't know. You really don't know. So that led to the line, there's no such thing as toxic paper, only toxic prices. There you go. So, yeah, absolutely. So that experience had to be just mind-blowing. Well, also from just a purely academic perspective for an economist, I mean, this was just an incredible time. Once every century, you see something like this. And there's so much that you're learning while you're doing. And it was not only just economics. It was also political economy. You know, what should lawmakers do and how should they do it and all the moving parts there.

33:39So it was a very amazing time. And that's when I wrote that first book. It's not a great book, Barry. And I did write a chapter, Chapter 7 on the rating agencies, but I did not put it in because I was part of the rating agency and no one would believe me anyway. Now you've been there 20 years. The financial crisis is more than 15 years in the rear window. Tell us a little bit about what Moody's Analytics is doing here and now. We're a very simple business. My part of Moody's is a very simple business. We produce economic forecasts and scenarios. Yeah, but that's not really a simple thing to do.

34:20There's a lot of inputs and a lot of moving parts. There is, but the actual business itself is very simple. And one of the things that has been kind of a tailwind to our work has been the regulatory environment, right? The financial institutions all over the globe need to do stress tests for capital planning. It's even now embedded in the loan loss provisioning. CECL here in the U.S. is an accounting framework that requires forward-looking projections. IFRS 9 overseas, climate stress testing, all those things require a very disciplined, comprehensive approach to economic forecasting. And so that's really been key to the business here over the last 10, 15 years.

35:10So that's kind of interesting. Your clients, are they necessarily Wall Street investing firms? Are they government institutions or non-governmental agencies. All of the above. All of the above. When I think of climate stress testing, I just was involved in this silly debate about climate change. And my answer is, hey, my opinion is irrelevant. Go talk to an insurer if climate change is a hoax. Yeah, great point. And what are your experiences doing climate stress tests for you look how hard it is to get insurance in places like Florida. Like how significant is something like that to the sort of research you would sell to a private entity like insurance?

35:54Yeah, it's critical. So house prices. Go look at house prices in Florida. We were talking about the west coast of Florida. They're falling, and they're falling because homeowners insurance costs are rising because of the cost of hurricanes and other storm damage. So the insurers take that all in, they raise homeowners insurance and that depresses demand and price. And of course, that has all kinds of implications for mortgage credit risk, for if you're a mortgage insurer, if you're in the mortgage business in any kind of respect. So that's a great example of where the kind of economic forecasting is really critical to what's going on in real life.

36:33And particularly with climate, it's real. It's happening. There's damage and insurers are trying to figure that out and they're now building that into their premiums and it's having a real impact. Right now, it's more concentrated in places like Florida and Texas and California, but it's going to become more of a problem in other parts of the country pretty quickly. To say the very least, we've seen fires in California. We've seen flooding in the mid-Atlantic states. Well, let me get – here's a good factoid for you. Or I'll ask you – guess which state has the highest homeowners insurance cost in the country?

37:10So the two that come to mind immediately are Florida and California. But the question makes me wonder, are we talking about places like Texas or the Carolinas? Nebraska. Nebraska? Because of tornadoes? Well, yeah, and convective storms, the big thunderstorms that come along and they drop a lot of - That hail. The hail does tremendous damage. Yeah. Yeah. You know, we just had a mild storm and this little branch smashes the windshield of the truck and I'm waiting three weeks to replace it. And when I asked the - we have glass coverage and I asked the insurer about this, they're like, you have no idea how backed up everything is.

37:56and there are delays in getting dumb things like windshields. So all that stuff, plus all the pandemic shortage of automobiles and things like that, that's driven automobile insurance up. I never would have guessed Nebraska. That's an amazing - Yeah, isn't that interesting? And also - Who's number two or three? I'm curious who's right behind them. Like where are Florida and California? They're up there. They're up. They're definitely up there. Top 10. Yeah, top 10. The state that had the lowest, and this is, I'm sure, going to change when we get more up-to-date data is Hawaii. Well, you just had the - The fires.

38:29Right. So that's going to change. But that had been the case. But the other thing is overseas, climate is a real issue. Just go to Indonesia. Right. The central bank is a client, and they're doing a lot of climate assessment because Jakarta is increasingly underwater, right? Literally. Yeah. You don't mean negative cash flow. You mean literally. I mean literally under seawater. The sea level is rising and it's doing real damage. And so you have to consider that. So here in the U.S., an issue overseas is becoming, in some parts of the world, existential. You know, I'm trying to remember if this was Wired or The Atlantic, but there was a big piece a year or two ago about Miami and the flooding risk from Miami.

39:15And this is very surprising. It's not the seas coming over the land. It's that so much of South Florida is built on this sort of limestone base, which is very porous to water. And so the flooding is not storms surging over the coastline. It's water bubbling up from, right. It's like a crazy, I never, you know, there's so many random factors that if it's not your space, wow, like I never would have guessed Nebraska and I never would have guessed Southern Florida's risk. Well, that's why those sinkholes, right? Right. That's why the sinkholes are a real problem. Where? In Florida. No kidding. Yeah, because the bubbling up, it undermines the ground.

39:59That's unbelievable. Coming up, we continue our conversation with Mark Zandi, chief economist at Moody's, discussing the state of the economy today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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41:16I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My better than average guest this week is Mark Zandi. He's the chief economist of Moody's and host. I'll take it. Host, my extra special guest, you called me out on it. So, you know, Conan O 'Brien's podcast, he makes everybody say their name and I feel blank to be Conan O 'Brien's friend and it's kind of a funny throw it to the guest to fill that in and I forgot her name she was on Shrinking Jessica and former Daily Show she said I feel pressured to say anything about being Conan O 'Brien's friend so I kind of painted myself into the corner maybe I'm going to have the guest oh you did a great job getting out of it so no worries What sort of a guest are you this week?

42:10So let's talk about the state of the U.S. economy today. How do you assess where we are? What indicators are most concerning to you? And then we'll drill down more specifically. The economy's struggling. I think it's on the precipice of recession. Precipice of recession. Yeah. What does that mean? Does that mean 50-50 chance this year? Because we've had economists forecasting recession pretty much since 2022. Not me. Not me. I haven't been. So this is a change. You're now starting to get more cautious. This is as nervous as I've been. And you've been robust. You've seen this as a robust economy the past few years.

42:49I have. Yeah. So the switch is significant. It is. So what is driving that? I have to be humble because what ails the economy is pretty obvious. It's economic policy, and it can change quickly. Therefore, you have to be humble here because policy can change, and we may not – the economy may find its footing as a result when we avoid recession. So there's a lot of – I hate using the word, but it's the only word I can think of. It's uncertainty. I mean, there is a lot of that in economic forecasting. I steer clear of the U word and – What do you say? Lack of clarity. Okay, I like that. Because I think it's not as pregnant as uncertainty.

43:31Lack of clarity. But no doubt about that. We've seen CFOs talk about withholding CapEx spending and even families postponing trips to Disneyland. And the data say it. So GDP growth, the value of all the things we produce, that was barely 1 % in the first half of the year. Right. Consumer spending has gone nowhere all year long. Manufacturing's in recession. Construction's in recession. And transportation distribution is in recession. You're not saying this is growth rate is slowing. Negative. You're saying this is in the red. In the red. In the red. Manufacturing, construction. Why is construction in the red?

44:09There's such a demand for housing. Home building is weakening very rapidly. Really? Is that a function of high rates and mortgages? Or is that a function of, hey, we can't find people to build these houses to say nothing of we're going to Home Depot and deporting the guys looking for work? It's affordability. People can't afford the new homes. That's all it is. It's just affordability. And the builders have done an admirable job with incentives, interest rate buy-downs, to keep the market going and maintaining construction levels. But that's over. They're not able to do it. No more buying down rates.

44:43So now we're seeing single-family home building come down for the first time. Multifamily has been coming down for at least a year because it got overbuilt. All these luxury towers going up in New York and Philly and Chicago. Palm Beach. Vacancy rates are... too high, rents are too weak. The commercial non-residential side is also very weak. The only strength is data centers. Clearly. Yeah. And even with that, if you look at overall construction spending, it's over, was it$2 trillion? It's declining. So I was on the impression that medical facilities, warehouses, things like that were still fairly robust.

45:20You're telling me that's no longer the case. There's different flavors. They're in the middle. Yeah, yeah. Healthcare is fine. Data centers are booming. Offices are way down, multifamily is down, single families way down. So you add it all up. And now public construction is starting to roll over, right? Because you had that big lift because of the infrastructure legislation that was passed a few years ago. But some of it is still ongoing. It's high, but it's now rolling over. It's a high level of spending, but you've now passed the peak in spending and it's now starting to come in. And we're not going to see any more infrastructure spending on the public side for quite some time.

45:56Really? I don't think so. I thought that would continue on for a couple of years. Wasn't that like a five or ten year legislation? It's an elevated level. Oh, and then it starts to tail down. But what really matters for growth is the change in. Gotcha. And you've passed the peak. It's coming now starting to come. So you've talked about everything. We haven't gotten to labor. Jobs, by the way. That's my next question. Tell us about the labor market. It's consistent with the economy is struggling. The job numbers are showing very little job growth in recent months. And I would not be surprised in the next few months, assuming we get the data from the Bureau of Labor Statistics.

46:28We can kind of talk about that. Assuming we actually get the data, we could actually see some—we would not be surprised if we saw some negative numbers, actual declines in employment. So Jim Bianco said something the other day that really kind of surprised me. First time in U.S. history, we are actually seeing negative population growth. not caused by a war or anything, but immigrants aren't coming to the country and people are being deported. And by the end of 2025, we may have a lower total population number than we had at the end of 2024. What does that mean for the labor market? Yeah. I mean, at the end of the day, if you're at full employment, and we're close, 4.2 % unemployment rate, the only way you can generate a job is if you've got someone to fill the job.

47:16You need someone who's working. So if the labor force isn't growing, and right now it's just flat. It really has. Well, actually, if you look at labor - Well, you could have job openings, but just they're unfilled. Well, that's right. That's right. But it's not a job until you fill it. Right. So you could actually, and right now labor force is declining, if you believe the data, believe the precision of the data. The level of the labor force in July, the last data point, is lower than it was back in January. And so that would suggest that it's going to be very difficult for the economy to generate jobs.

47:52And it's very possible we start getting job loss in just negative numbers. So what odds are you putting on a recession? And we'll talk about inflation and tariffs in a moment. But what odds are you putting on a recession in Q4 2025 or Q1 2026. I think our baseline outlook, my baseline outlook has no recession, just a weak economy. We kind of struggle the way through. Like a sub 1 % GDP and a slightly - It's actually 1 % on the nose year over year through Q4 of this year, Q1 of next, which is historically below the economy's potential. No job growth. Like a zero BLS print every month. I think I have average monthly job growth in - Sub 100.

48:35Oh, way, way, like 25K. Really? 25, 50K, something like that. You know what's shocking about this sort of discussion is, regardless of who you voted for or what your political affiliation is, there's no debate. The first quarter, 2025, was a very robust economy with markets hitting all-time highs. And here we are eight months later. Revenue is high. Profits are high. Expectations of forward growth in the stock market is high. I know the old joke is stock markets have predicted nine of the last four recessions. Right, right. But what are all-time highs and this ongoing enthusiasm for growing corporate profits?

49:26What is that saying about the economy? Yeah, and that's one reason why I don't have a recession in the baseline. The equity market is held up, although obviously a big part of what's going on in the equity market is related to AI, and that has nothing to do with the business cycle. It's AI and half of the S &P 500 revenues are overseas, so it may not be reflecting US growth. And also you've got tax cuts, right? So if you just assume a - Stimulus, fiscal stimulus. If you have constant PE multiple, if you raise after-tax earnings, you should get a higher price. So if you abstract from those things that are independent of the economic cycle, the stock market at best is flat from where it is at the beginning of the year.

50:04And that's the economy. It's flat. It's gone nowhere. Now - The economy is flat, but the stock market can still elevate off a flat economy with tax cuts, AI spending, and international. And that's my sense of what's happening. So what's going on in the equity market is actually, I think, consistent with what we're observing in the economy. Now, if the stock market starts to head south writ large and we see non-AI part of the market starting to go south here, I think that's a strong signal that we're going in. And the equity market is not only important as a signal, but increasingly it drives economic activity because the bulk of spending in the economy today is done by folks in the top part of the income and wealth distribution.

50:50Top 20 % is half of all spending. By our calculation, the top 10 % account for – oh, you're right. It's the top 20 % account for 50 % of the spend. And the top 10 % is most of that. And most of that. And the top 5 % is most of that. So very – not a well-distributed consumer spend. It's high-end and luxury goods, which that's top 2%. Like that skew is very – the good news is if you go buy a private jet, you can depreciate all of it in year one of the – I didn't know that. Thanks to the new tax bill. But that sort of stuff – so I remember when Bush did his accelerated depreciation, which I want to say it was – depending on the item, it was three to seven years instead of 10 to 20 years.

51:47Right. Being able to depreciate these luxury goods, maybe that's a factor in driving some hard spending. Yeah. And that should also help the construction markets too, right? You would think, right? Real estate's a little different. So I don't know if you depreciate all of your build out in year one, but I'm going to guess it's not a 20-year depreciation schedule. You probably can do it. Right. I should really ask one of my tax guys what the depreciation schedule is for new construction, because you would think that would encourage more building, and we desperately need more single-family homes.

52:25And that may be the way out of recession. Not only is it really getting more fiscal support, right? And we will likely get another reconciliation piece of—the BBB, the Big Beautiful Wheel, was reconciliation. They'll take another—they have another shot at that on the other side of the fiscal year. October? Yeah, that's when the new fiscal year begins. And so they could come up with more stimulus. Right. You've heard talk of a stimulus check. You know, I'll pay for the – we'll take the tariff revenue and I'll rebate some of that back to Americans in the form of a check. And that would be stimulus.

52:58For sure. And that would support the economy. Listen, it worked the last Trump administration. He wrote a check. Exactly. And when people were stuck at home. Right. And, you know, I try and be nonpartisan when I look at those sort of things. it turns out Keynes was onto something a century ago, wasn't he? Well, particularly if the economy's not at full employment. If you're flat on your back like you were in the pandemic or the financial crisis, you provide stimulus, then you don't get the crowding out. You don't get the higher interest rates. You don't get the inflation, but you get the growth.

53:28We're now closer to full employment, so that's a bit of a more dangerous game because if you overstimulate and you're at full employment, you're going to get the inflation. Already, inflation is an issue given the tariffs and the immigration policy. So let's talk about tariffs before we get to inflation. What's your perspective of the impact of both the policy and the way it's been implemented? Well, I'm not a fan of broad-based tariffs. I mean, strategic tariffs, no problem. I kind of get that. But broad-based tariffs, so we've been there. We've done that. You mentioned the 1930s. In fact, you can go back 100 years before that under Andrew Jackson, and we tried broad-based tariffs, and it didn't work out so well.

54:07It takes about 100 years for us to forget the mistake and do it again. So I don't think this is going to end well. It raises inflation by definition. And then we'll see more of those prices pass through to consumers over the next 6, 12 months as time passes here. And it lowers growth. It pushes the economy towards stagflation. And the immigration policy, highly restrictive immigration policy, and I get the need for addressing the southern border. We're talking about legal immigration. not illegal immigration. Exactly. It's very restrictive, and that reinforces the higher inflation and the weaker growth.

54:45So you've got two policies that are very substantive, working together to raise inflation and weaken economic activity. So reducing legal immigration contributes to higher inflation? Explain that. You're in a very tight—go back to the labor force, tight labor market. Gotcha. Less bodies, higher wages. We're disrupting a lot of businesses. Ag, we know that. restaurants, construction, leisure, hospitality, elder care, child care, all those things. And it presumably will raise costs, labor costs. You'll see wages rise and add to inflationary pressures. So we keep hearing from the Fed that they're data dependent, things are ambiguous, there's no necessarily clear path to future policy.

55:32Is that a reasonable response given and everything that's been going on? Because it seems odd to say, on the one hand, we're at risk of recession. On the other hand, there's a chance of increased inflation. Sounds a lot like 70s era stagflation. It is stagflation. What does that mean for where rates could go over the next couple of meetings? It seems like a 25-bip cut is sort of locked into September. And I don't know how much of that is, hey, let's just throw a virgin in the volcano and make the president happy. But there are credible reasons in both directions. This isn't like a one-sided debate.

56:14I think their decision to stay on hold was the right decision because they don't know, what do I respond to? The inflation that I know is coming or the weaker growth that is in train. And I don't know where the policies are. I have no sense of where the tariffs are going to land, when they're going to land there. I don't know what's going on with immigration policy. So let's just sit on our hands and just let this thing unfold a little bit before we can move on policy. Businesses have done roughly the same thing. They're saying, I don't really know. Therefore, it's not I'm going to cut, but it means I'm not going to expand.

56:46I'm going to sit on my hands. And that's why the economy has gone sideways here since the beginning of the year. But here we are now. And if you're at the Fed, and I think kind of their weights on their goals are shifting. They're putting more weight on the economy than on inflation. Their thinking is inflation because the tariffs will be more one-off. They won't be persistent, which I think is a reasonable thing to think, but we'll have to see. But we know the economy is weakening, particularly the job numbers. And again, going back to we're going to get some negative numbers here, and I think that's what they want to avoid, particularly in the context of the political environment.

57:20Because there's a lot of stuff coming out of Washington about reevaluating the Fed's – the Federal Reserve Act of 1913, their independence. And if you're at the Fed and you're seeing that, the last thing you want to do is go into a recession and get blamed for the recession in the context of all those kind of that political overlay. To say the very least. So we haven't really talked about integrity of data, but since you alluded to it earlier, let's bring it up. You know, I'm a big fan of George Box. All models are wrong, but some are useful. Yeah. And so my experience over the past, I don't know, 15 years, whenever I have a question about how something is put together in either a BEA or BLS data point, I just pick up the phone and call them and they eventually route you to the person.

58:10Oh, here's the person who developed the birth-death model. Or here's the person in charge of survey data. They couldn't be more forthcoming, transparent, and helpful. Totally. And I'm kind of surprised at some of the crazy stuff I hear from people. I just heard a bunch of stuff about the MIT Billion Price Project, which ended up getting picked up by somebody. And they were talking about how great that is. And I'm like, hey, when you track this against CPI, they're almost identical. So they're both different models. One is a little more skewed to the weighting of how consumers spend money. The other is just scraping all these data points, but they end up in the same place.

58:56How do you think about the integrity of data from the BLS? Right now, I think it's fine. There's problems, particularly with survey responses, but everyone's having a problem. But that's true everywhere. Look at University of Michigan sentiment data has been plummeting for 10 years. And the answer to that isn't cut budgets. It isn't to cut staff. it is to put more resource in to help try to figure out how to improve those response rates. But even in the employment data, the payroll employment data that we're focused on, the response rates by the third month is, the first month the response rate is 65.

59:30I'm making this up, but roughly speaking, 65%, 70%. Which is below what it used to be. It's down from where it was. By the third, it's 90%, 95%. So it's still a very, very good survey. but as a result of the low response rates, we always get revisions to the data. In more typical times when the economy is moving in a straight line, those revisions are small. When you're at an inflection point or a turning point, like I've been arguing we are, you get these big revisions. In fact, there's information in the revisions. It's not a bug. It's a feature. It's saying, hey, the economy is weakening and so the response rates, the responses we're getting after the first month are weaker than the ones we got in the first month, and therefore we're revising down the data.

1:00:12That's signaling, that's a strong tell that the economy is struggling and potentially at a turning point. So you're saying the July non-farm payroll, and I don't want to put words into your mouth. We had a July non-farm payroll that was pretty punk that came out the first week in August, but the revisions were substantial for the prior two months, this isn't just a noisy data series or somehow partisan wrangling. This is a warning shot across the bow. Hey, the economy is starting to transition into a weaker state. Pay attention. Is that a fair statement? That's the point. That's the point. It's not that the data is any worse than it has been historically, if there is anything nefarious going on.

1:00:56That is the nature of the data and it's telling us something. There's real information there. And so I, you know, I do, the thing I worry about the most is if there's a decision to not release the data as timely as it's being released today. The employment numbers that we've been talking about are the most timely data to get released the Friday of the first month of the day. Oh, the quarterly nonsense that came out? That just seems. Yeah, that really makes me nervous. That's, I think Wall Street would have a hissy fit if that happened. You know, what people talk about the Powell put, I prefer the expression, the Trump collar.

1:01:34When the market's near all-time highs, he's emboldened and rolls out stuff. When the market's down 15%, 20%, that's a floor. All right, we'll pause this for 90 days. because rightly or wrongly, and I think there's more to this than we give President Trump credit for, but when the stock market is doing well, he takes that as his report card. And when the stock market is doing poorly, it makes him unhappy. And his bias is towards doing something, anything. What do we have to do to get the stock market back on track? He doesn't care about polls. He cares about one poll, and that's the Dow Jones Industrial Average or the NASDAQ or the S &P, kind of focuses his attention.

1:02:17Yeah, that's a nice way of putting it, the Trump caller. So I don't want to make you late for lunch. I have one more question before we get to our speed round, our favorite questions. And it's a curveball question, which is, what are investors and economists not talking about, but perhaps they should be? What do you think is an important topic? And I don't care. Policy, assets, geographies. What's getting overlooked but shouldn't? I'd say Fed independence. Not that people aren't talking about it, but they're not focused on it like they should be focused on it. I think this is a real, potentially a real significant problem.

1:02:58And the independence of the Fed is critical to a well-functioning market economy like our own. We know that from our own history. You can see what happened back in the 70s and 80s, or looking overseas. Sure. And we need to preserve that independence. And it's not only about the actual independence. It's the perception of independence that's really critical. And it just doesn't feel like, to me, you follow markets more closely than I do. Maybe you have a different view. But I just don't get the sense that markets are focused on this like they should be at this point in time. Huh. Pretty interesting take.

1:03:31All right. Let's jump to our speed round. Okay. Feel free to bang through these as quickly as you want. We'll get you to lunch on time, starting with who are your mentors who helped shape your career? Well, I mentioned Dr. Klein, the Nobel laureate. He clearly was a key person in my professional life. My father, professor of engineering at Penn. By the way, he'll claim he was the first to use neural nets back in the day for the studies he was doing. but I'd say those two folks or those two men were the key to my professional development let's talk about books what are some of your favorites what are you reading right now it sounds hackneyed now but you know Barry I like I just love Alexander Hamilton by Chernow I mean I that was why is that hackneyed well because the book doesn't have any wrapping in it people should be aware if they go get this book it's a deep historical dive it's not a entertaining bunch of show tunes Oh, yes, that's for sure.

1:04:34But it's very entertaining, at least from a nerdy kind of perspective. Chernow has a new book coming out this fall, doesn't he? Or did it come out already? Well, I've got the – I'm reading the one on Washington. Is that his latest? I think that's his latest, yeah. I think so. He is an amazing writer and – And I like that period in economic history. To say the very least, it's absolutely fascinating. I don't normally read self-help books, but I like this book, Outlive. I know everyone else has read it by three or four years ago. So now I'm hanging. Is it worth reading? Oh, Mark Twain is his name.

1:05:10Oh, Mark Twain. That's right. It's a big tome. It's sitting on my nightstand gathering dust because it's so intimidating. I don't know how he does it. It's so intimidating. Deep, deep research. Outlive. Oh, yeah. So it's an easy book, a summer book, right when you're on the beach. It's a – how do you live your life well long run? And a lot of it is just intuitive. It's not non-intuitive. But there are some things in there that I found useful in terms of the test you should take. And I love the hanging. A big part of the work is around the grip strength. And so one of the ways you improve your grip strength is by just literally hanging from – go try it.

1:05:57Okay. it's i've been he's like wait you don't have to do chin-ups or pull-ups you just have to hang you think this is easy and he says men if men can do it for two minutes that's great women one minute i'll tell you i i can't get i literally cannot get i can't imagine i can't i'm not going to do 10 pull-ups yeah but i i would be surprised if i couldn't hang for uh right for two minutes but yeah try it try it especially uh that that's that's interesting all right so we're talking about books, what about streaming? What are you watching or listening to? My wife and I watch something every night, usually half hour to an hour.

1:06:32We're the same. It's a post-pandemic hangover. Yeah. Because when you were stuck at home, you couldn't go out. Right. Didn't we all? I'm highly annoyed with all these streaming services. I'm like, come on, hand me a break. So what are you streaming these days? You got any suggestions? Yes, yes I do. I have plenty. I just finished Disclaimer. Did you watch No. I love a good suggestion. Disclaimer. Yeah, it's Kevin Kline and what's her name? Cate Blanchett. Oh, no kidding. It's short, 6 '7". I love those. We watched Department Q, which was a limited series. Department Q is good. Really interesting.

1:07:09Yeah. Actually, I watched that. That was very good. This is one I liked a lot. The acting is great. Yeah. The ending is a little contrived. They need to do two more episodes or something. I'll give you three interesting things we've been watching. My wife got me sucked into Killing Eve, which is an espionage thriller. Oh, I heard this. We just, it's four seasons. We just started the second season. Killing Eve. Everybody in it is great. It's a little, you know, some of it is, it's not terribly gory. Right. People get killed. Yeah. It's assassins. I'm okay. And yeah, you know, I don't like the police procedurals where they show you all the, when it's too realistic.

1:07:49Yeah. Like we tried to watch The Pit. My wife is like, I'm out. Yeah. All right, I get that. So Killing Eve has been really interesting. That's a good one. And what's fascinating about The Gilded Age is it's four stories, old money, new money, the staff in both of these houses across the street, and then the old money secretary who is a black woman and then her whole family uh and that storyline but what's amazing is all the issues it's 150 years ago same today it's wealth inequality it's status it's economic mobility and it's tribal and it's so fascinating gilded age the gilded age really that's a good one too interesting yeah i didn't want to watch it to me it's a downed abbey kind of thing kind It looked like another soap opera, but amazing cast.

1:08:46You get sucked into it. That's on HBO. You said three. Do you want a third? Well, Department Q was the limited. That was a good one. If you like the espionage sort of thing, that one kind of unfolds really slowly and deliberately. but Killing Eve is much it's much faster and crazier and more interesting and it mostly takes place in Europe which makes it you know it's MI6 I won all sorts of awards she's sort of ready and when she was I walk in and like what's this she's like just watch 10 minutes of the first episode alright and we started watching it and sucked right in Oh, that sounds good. Yeah, definitely watch that.

1:09:42It's four seasons. That's right. So it gives you plenty. And you can bang out two a night very comfortably. Our final two questions. What sort of advice would you give a recent college grad interested in a career in economics and finance? Just show up. Show up. Just show up. Do the work. Show up. Show up. I guess the other thing I'd say is, I tell my kids this. every point of contact matters. Every relationship, every phone call, every email, every Teams meeting, because things come around. You meet somebody in one way, they'll come back 10 years from now. And if you did the right thing, if you were attentive to their needs and interests, it'll benefit you in the long run.

1:10:36It's not easy to do. It takes energy. But every point of contact matters. Really interesting. And our final question, what do you know about the world of economics today you wish you knew way back in the 1990s when you were first starting out? Well, I thought everything could – back to your point about box and models. I thought everything could be solved with a model. It's like, you guys, come on. This is just arithmetic, mathematics. We should be able to do this. No. The world is a very messy place. Really, really good stuff. Mark, thank you for being so generous with your time. We have been speaking with Mark Zandi.

1:11:18He is the chief economist of Moody's Analytics. If you enjoyed this conversation, check out any of the 550 previous discussions we've had over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and check out my new book, How Not to Invest, The Ideas, Numbers, and Behaviors That Destroys Wealth and How to Avoid Them, How Not to Invest at Your Favorite Bookstore Now. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Meredith Frank is my audio engineer. Alexis Noriega and Anna Luke are my producers.

1:12:07Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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