The Indicators of this year and next

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1:39That's plus.npr.org. The link is in our episode notes, too. And thanks. This is Planet Money from NPR. Hey, it's Adrienne Ma from The Indicator Podcast. and it's that time of the year when we get to... Hey, this is a weird request. Are we able to run a crackling fire under this whole intro? Is that possible? Oh, I'm Kenny Malone from Planet Money. Ah, yes. I can feel the warmth right now. Jeff, come on in. Come around the fire. Come on in. Come on. Thanks. Thanks, guys. It's getting kind of cold out there. There's Jeffrey Guo. Jeff Guo. Great to have you here. It's so cozy in here. Love a combustion event.

2:20It's that time of the year where we gather with friends or, as we do on The Indicator, where we gather with our Planet Money family and do what families do best around the holiday season. Engage in brutal, soul-breaking arguments in a fashion most public. There's nothing like it. It's so, so warm and friendly. It's time for Family Feud. That's right. Ba-ba-ba-ba-ba-ba-ba-ba. Okay, so today we have a head-to-head-to-head competition between me, Kenny, and Jeff for Indicator of the Year. And then in part two, we've got our best predictions for Indicator of 2025. You know, one thing I do wonder, every year we do this, the sort of timer buzzer is offensively loud and maybe an OSHA violation.

3:09Can we get that checked ahead of time this year? Oh, if anything, I think we're going to turn up the volume on the buzzer. Okay, well. The time limits must be strictly observed. Just to recap the rules, each of us will make a spiel, an argument for why our indicator is the indicator of the year, and we'll only have 60 seconds or less to do it. Or else... We die. Hey, that is too loud. Come on. And in the end, you, dear listener, will vote on who had the indicator of 2024. Coming up on the show, we've got... An indicator going to the moon! I have got a nice cold beverage. Hint, hint. And I'll be talking about our consumer feelings.

3:52That's all after the break. This message comes from NPR sponsor Zendesk. Introducing the next generation of AI agents built to deliver resolutions for everyone. With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies,

4:26All right, it's family feud where we lovingly quarrel over what was the indicator of the year that just passed and where we try to predict what will be the indicator of the year to come. But let us first begin with 2024. And how this works is we're going to have 60 seconds on the clock. Each of us is going to have a chance to make our case for the indicator that best captured the year 2024. Are you each ready? Have you brought notes? Have you brought, I don't know, speedy read-throughs? What do you got? I got it all up here. Adrian, why don't you then, Mr. Memory, take it first? 60 seconds on the clock.

5:14And go. Nothing captures 2024 quite like my indicator of the year, consumer sentiment. America's emotional barometer for how optimistic or pessimistic consumers are feeling about the economy. Now, in pre-pandemic times, the University of Michigan's Consumer Sentiment Index was hovering around 100, meaning people felt okay about the economy. But for the past year, it's been down around the 70s. And this one indicator explains so much of what we saw this past year. It shows how people still felt the pain of inflation. It explains why people felt lousy about the economy despite low unemployment and rising wages.

5:53And it explains why a lot of voters wanted to ditch the Democrats and bring Donald Trump back into office. The latest consumer sentiment numbers even show how Republicans felt a surge of optimism about the economy right after the election, while Democrats felt the opposite. In short, consumer sentiment isn't just a reflection of the economy. It was a political catalyst that's shaped the world we're currently living in now. Boom. Look, I'm not here to rag on other people's indicators, but I will say in last year's family feud, I won indicator of the year with consumer sentiment for 2023. So it doesn't devalue you doing it now.

6:32It doesn't mean that you are repeating it and uncreative. It doesn't mean any of those things You know, I just Sometimes The sequel is better than the original Sometimes Just like Godfather 2 Was better than Godfather 1 Or Toy Story 2 They just called it The Godfather Alright, alright, fair Okay, let's see if you can do better, Kenny What's your indicator of the year? Alright, ready? Put it on the clock Are we ready? Someone give me the go Okay, 3, 2, 1

7:32Come on. explanation is the spike is that people assume the incoming administration is going to be very friendly to crypto, which ironically is, I guess, a kind of trust, crypto trust in incoming institutions. Either way, I think Bitcoin is an indicator of the year because its very existence, its modern value is a very 2024 Rorschach test for how people feel about the world's institutions and where they are headed. Thank you very much. I rest my case. okay bitcoin can i ask i'll be honest did that make any sense i don't want to sound unconvinced in my own argument but what do you think i think you gave it away at the end there when you said that bitcoin is a indicator of the year oh no did i say that indicator of the year so kenny's subconscious thwarting him again no retakes no retakes look i currently do have the belt for winning the feud and I, uh, if it has to go to somebody else, because I said the indicator, it's okay.

8:31The way I would think about it, the way I would challenge our listeners to think about it is when in 40, 50 years, I don't know, when you're telling your grandchildren, man, 2024 was about length. Are they going to say 2024 was about Bitcoin? They might, they might. They'll be like, they'll be like, we used to have a thing called fiat currency. And they're like, There was something other than Bitcoin, Grandpa? And we'll be like, yes, yes, yes, my darling Hodel. That'll be her name. But not because of Bitcoin, because I love, just because I love Fiddler on the Roof, that's all. No, you guys really?

9:05Neither of you? Come on, that's such a good joke. I wish Waylon were here. She would get that. Oh my God. Well, I don't feel great about that effort, I'm gonna be honest, but that's okay. Jeff Guo, let's put 60 seconds on the clock. Actually guys, before we get started, I'm actually a little parched. So just give me one second. Like, I'm serious. Actually, I just need to get something real quick. Hold on. Where is Jeff? What is Jeff doing? Didn't we say no bits? No bits. What? No shenanigans. No one said that. Jeff has literally wandered off camera. His camera is off. He's making us wait. I haven't, we have passed my heart out for this recording when I must go pick up my children.

9:44And yet, Jeff must go get a can of soda for whatever he's about to do. Disrespectful. I am very confused right now. I'm back. I'm back. I'm back. My apologies to Kenny's children. They're wonderful. You can pay the daycare fee when we're late. Okay. So now, with my ice cold beverage in hand, I can tell you about my indicator of the year, which is the beverage curve. Which, to be fair, has nothing actually to do with beverages at all. No, it has nothing to do with beverages. It's not even spelled the same. But anyway. Someone want to start the clock. Yes. That is what we were waiting for. Wonderful.

10:21I was thirsty. Three, two, one, go. Ah, okay. So the beverage curve, which is named after the economist William Beveridge, is the name that economists have for the relationship between the rate of unemployment and the rate of job openings. So, for instance, usually when job openings go down, it's harder to find jobs and unemployment goes up. But, but, this past year, as the Fed was pumping the brakes on the economy, something weird was happening. Companies were posting fewer and fewer job openings, but unemployment wasn't really going up that much. In other words, the beverage curve seemed kind of broken.

11:01And that is a good thing, because it means that the Fed has been able to tame inflation without inflicting a lot of painful unemployment on everybody. it's almost as if a lot of those disappearing job openings were just like, you know, just like, you know, the froth on top of a carbonated beverage. Get it? Get it? Okay. Anyway, to me, that is the big story of 2024, the broken beverage curve that helped us get to this soft landing. We got your time's over. Your time's over. Well, we almost got to the soft landing. After all of that buildup, we have half a mind to have only given you 45 seconds.

11:36Anyway, you're lucky. You've got the full minute, Jeff Guo. Now that we've gotten the feud out of the way, everybody, let's go ahead, let the old fire up again. We can be cozy together and be friends because that really is what the holiday is about. It's about fighting briefly and coming back together and then dorking. And sitting in front of a chemical reaction. Yes, yes. It's a beautiful, beautiful thing. Yes. All right. Listen, we've made our cases for Indicator of the Year. Now it is your turn to vote, listeners. you can email us at indicator at NPR.org. That's indicator at NPR.org. Or you can also check out posts on planet money's Instagram at planet money and leave your choice in the comments there.

12:19Coming up after the break, we're going to make our cases for the future. What will be the next indicator of the year for the year 2025? And while we go into the break, Jeff, why don't you want to throw another log on the fire? It's just getting, Oh yeah. Yeah. Whoa. Not that big, Jeff. Jeez. You know, it's not that good to have indoor fires because of the CO2. It makes people drowsy. And it also inhibits cognition.

12:50Okay, guys. I think we've got pretty much all of 2024's indicators cleaned up and cleared out of the closet. All the indicators. Gone. No crumbs. Is that what the kids say? Gone. That is... Sure, let's go with that. There is one more mysteriously unmarked box here, though. Just if I can take this out here and let's see what's inside this thing anyway. Adrian, is that a glowing orb? Oh, my God. I think we should touch it. Sure, why not? All at the same time. Ready? Let's take three, two, one.

13:33I feel like I can see it all. The future, the present, the past. I've been blessed with the knowledge. Time is a flat circle. Are you seeing it too? Oh, yeah. I'm seeing indicators of the year ahead. Oh, my gosh. Inflation expectations. The mythical R-star. And global trade. Or the lack thereof. Okay. So why don't we start? Adrian, why don't you start? My indicator to watch for 2025 is inflation expectations. This is an indicator that you can find in more than one place, like the Federal Reserve Bank of New York has one. The University of Michigan has their own version. And basically what they do is they conduct a survey of consumers and ask, where do you think prices will be one year from now or two or three years from now, etc.?

14:28Oh, ask the people, the wisdom of the crowds. This is good. And Adrian, you trust the wisdom of the crowds is what you're saying. Yes, of course. Implicitly, no PhDs allowed in this space, okay? I don't know if that goes into the survey, but yes. So the reason I think this is going to be an important indicator in general is that it gives us a hint about how consumers will behave in the future, right? If consumers believe that inflation will increase in coming months, they'll be more likely to want to spend their money now before it loses value. But also, if these consumers are spending money like there's no tomorrow, that can actually contribute to inflation and make inflation a self-fulfilling prophecy and at worse become an inflationary spiral.

15:13But I think that this indicator inflation expectations is going to be pretty important in 2025 because even though inflation has come down, we got President-elect Donald Trump who will be taking office soon. and his economic proposals have a lot of economists worried about possibly a new round of inflation, right? He's proposed tariffs, which as we've talked about on the show, could make foreign products more expensive. He's pledged to carry out mass deportations of unauthorized immigrants, which could be a double whammy for businesses that employ those immigrants, right? Because if you think about industries like agriculture and construction, they could incur costs from losing employees who work for them and may have to raise wages to attract new workers.

16:00And all that could also contribute to rising prices. All right. So inflation expectations, Adrian. That's pretty good. Pretty good. Jeff Cole, what is the glowing orb foretell in your eyes? I think, you know, we can all agree that 2024 was a big year, right? A pivotal year, the year the path of history took a turn. The U.S. had an important presidential election. The Fed more or less declared victory on inflation. Taylor Swift wrapped up her world tour. So there's no doubt, right, that we live in a different world now. And the big question going into 2025 is just how much has that world changed?

16:43And that is why my indicator for 2025 is the indicator of all indicators, our star. Long-time Planet Money listeners may know that R-star is something we are kind of obsessed with. It's arguably a mythical number. Yes. And so just to give like a brief explanation, you know how like the Fed sets interest rates, right? Yeah. Interest rates are like a thermostat for the economy, basically. If the economy is running too hot, the Fed will raise interest rates to try to cool it down. And if the economy is running too cold, then the Fed will lower interest rates to try to stimulate it. Well, R-star is supposed to be that ideal interest rate for the economy in the long term.

17:25So it's like when you finally find the perfect temperature on the thermostat where your room is not too hot and not too cold. Yeah, it's like a reflection of just your natural metabolism. And nobody actually knows what R-star is for the economy. It's not something you can measure. It's more of something you predict. It's based on what you think the future economy will look like, whether you think it'll run hot because of a lot of government spending or a lot of gains in productivity, or if you think it'll run cold because of, I don't know, aging populations or lack of opportunities for growth.

18:03All right. So these are huge, important predictors of where the economy is going and sort of how much the engine should get revved up. Yeah, yeah. But why now? Why in the future? Why do you think it's important now? Well, because something really interesting is happening to our star right now. You know, before the pandemic, a lot of people thought that our star was around like one to two percent. But after the chaos of the past year, the past couple of years, really, people right now, they're really not sure what the future holds. They're arguing is our star maybe like three percent. Maybe it's going to go up to four percent.

18:44And I suppose it depends to some extent on what you think about the long term consequences of, I don't know, AI and productivity, unrest in the Middle East, of various Trump presidency policies. That's a big one. Yes. Yes. Our star is basically everything. And right now we are at this kind of weird inflection point, I feel like, for the whole world. So in 2025, I think the big story is going to be what is our star? And just like a thermostat, nobody can seem to agree on where it ought to be set. 68 degrees at all times. Wow. Wow. 68. Mr. Big Spender over here. Okay. Let us turn to Kenny. Okay.

19:29What is your indicator to watch this year? Yes. It is my prediction, gentlemen, that 2025 will be the year of global trade, baby. Or lack of global trade. Depends. It depends. We're going to see because that is my indicator of next year. It's going to be global trade or the opposite of that. Yeah, just stuff moving around the world, the rate of stuff moving. I know it does sound like an ambiguous, not real indicator, but in fact, the World Trade Organization reports world trade numbers regularly. And of course, at the heart of watching this next year is anyone, anyone rhymes with sans serif. Tariffs.

20:18Tariffs, yes. Tariffs of unknown size is, I guess, my point here. Because President-elect Donald Trump has floated at various times, like a lot of different potential tariffs. So there was at some time floated a baseline tariff of 20 % on all imports, 25 % on goods from Mexico and Canada, and as much as 60 % on goods from China. Those are likely the extreme ends. We don't know for sure where the tariff numbers will land. And of course, that has me thinking a lot about anyone, anyone rhymes with cute folly, anyone. Smoot Holly Smoot Holly Of course Of course These are the infamously big and broad tariffs passed in 1930 Which are then featured in a boring lecture in the movie Ferris Bueller's Day Off Where the teacher keeps saying anyone, anyone Which is why I keep doing it See what I was doing there everybody?

21:21There you go I see what I was doing there But the thing is following those enormous tariffs global trade dropped by about 26%. It was a lot. And so for my money now, global trade is what we should be watching next year. We are nearly 100 years post Smoot Holly. The world is more globally connected than ever. And what happens when you drop gigantic tariffs into that world? And I guess how gigantic will the tariffs be? All of that will matter quite a bit. And I think it is worth watching next year. Well, we have peered into the glowing orb and we have somehow survived with all our digits intact.

22:07Speak for yourself. Oh no, Kenny! I'm sorry. I hope it was worth it. Absolutely our pleasure. Of course. Next time I'm going to bring sunglasses. You've got to tell us ahead of time if there's going to be glowing anything. Thanks for sharing the curse of knowledge with us. I would share the curse of knowledge with you anytime.

22:28These episodes of The Indicator were produced by Angel Carreras and fact-checked by Sierra Juarez. They were engineered by Gilly Moon and Neil T. Vault. Kate Kincannon edits The Indicator. I'm Kenny Malone. This is NPR. Thanks for listening.