Transcripts For CSPAN3 Economist 20240703

[inaudible conversations] hello everyone. Hello, hello. Thank you for coming today. We really appreciate you being here. My name is Michael Redman i am the vp of programming for the National Commerce club. It is our first event of 2024. We are very excited to welcome you to this venue for this. Keep an eye out for emails that will be reminding about our next events in person here again in a couple of weeks it will be a very interesting events on fiscal policy in the u. S. And what it all means in the very contentious year for debates. I would also like to thank robin for finding our speaker here today. We are really pleased to welcome mark to present to us. His ideas for 30 minutes or so we will follow it up with q a where you will have your chance to ask a question for just remember every question ends with a . Please stick to that. [laughter] he is the chief economist at moodys analytics. Is a provider of Economic Research and analysis. He is the author of books on the financial crisis and the Great Recession regular consults with policymakers he testifies before congress prays also the host of Insight Economics the podcast that talks on might spot a fight list for the year is the most listened to artists. My wifes is taylor swift so you have competition for the household yours is a bachelors in his phd from the university of pennsylvania as well. We are really grateful for him to be here with us. Please join me in welcoming him. [applause] thank you can you hear me okay . It is good to be here. Want to thank robin for the invitation and for the introduction. From board for sake of disclosure of the board of directors. In the lead director of policy map which is a Data Visualization company. Its in my hometown. Maybe what i will do is speak for 25 or 30 minutes and then turn it back to the group to see where you want to take the conversation, does that sound like a plan . Okay. Is this better . Yes. Taylor swift would have no problem doing this. [laughter] is an economist im not well versed and microphone etiquette. Good to be here. Whos taylor swift . [laughter] by the how many times have i spoken . Is is my third time . Does anyone remember i knew it remember what he said last time . I got it right, i got it right. I have a track record. I will speak for 30 minutes on the Economic Outlook let me begin with the bottom line. I think the economy is a performing well the prospects are good when i stay tuned near term summit remainder of the year. What say to this time next year. Gdp growth is strong. Interestingly not only have we not had a recession in 2023 but it was a very good year the economy had a very strong growth of gdp growth. We will explain some growth similar to that in 2024 somewhere between two and three half percent. The economy is creating lots of jobs i think will throttle back a bit. That is probably a good thing the economys trading cordova billion jobs per month unemployment will remain low we have been there for two years. And i think the key to all of this inflation will continue to moderate todays numbers notwithstanding. The Economic Data zigs and zags is zagged today did you look at the data . You probably looked the stock market. In my mind that does not change the trajectory here. I think the economy has another good year in store for it. Let me give you few reasons for that optimism. And then i will buy it back a little bit. I think the risks of my optimism i think there is Downside Risk but theres also upside here as well. The risks are relatively symmetric but i will focus on the downside thats where most people are focused. Then i will leave you with a couple different indicators to gauge which direction we are going and how they will play out. The reason for optimism i already alluded to it inflation is coming in. Its reasonably gracefully. If you look at Consumer Price inflation we got this report for january today if you look at cpi inflation excluding shelter and i know shelter is a big component we will refer to the index and ill talk about that in just a Second Period but take that out cpi inflation is already back to the Federal Reserve target. I did this very quickly. I was down in florida i took a plane up here. Have a few things going on in the next couple of days. They gave me a room so i had a chance look at the data. Yearoveryear growth was 1. 6 obviously the target is over two. Rub gap between where we are on inflation and overall inflation where we want to be is the cost of shelter. That is where we have the surprise today. I dont if you noticed but thats where the mist was in terms of the number it came and hot. Particular on socalled owners with the cost of home ownership. And all the data it would suggest that should moderate. I forecast many think somethings somethings a very competent and some not so much. I am very confident the process Housing Services is going to come in here. Ultimately that is tied to market rents and rents of the plethora of data lot of multifamily supply because the supply chain issue during the pandemic. Now that it is the in the Rearview Mirror the supply chain is normalize the market to back up and running all the supplies coming in. Hometown of philly or chicago and that will flow through and we will see housing costs come in inflation back to target. I would be surprised if we are e not back to the Federal Reserve target by the second half of this year. I think all the trim lines look good despite todays numbers on the Market Reaction to that we will see how it ends up. But i think were in pretty good shape there. Reason number one for optimism and by the way it is inflation that really messed up many economists forecast of 2023 why they thought recession. I think the issue was there was a mixed diagnosis into what caused the inflation. Theres lots of reasons demand and supply. At the tippy top of the reasons is supply. It is the pandemic. I mention that in the context of supply chain and labor market. In the war in ukraine we underestimate oil, natural gas, Agricultural Prices to jump. Those two supply shocks conflated because inflation to increase and thats why they were on high alert, devcon one. I would expect a wage, price dynamics to spiral and jacked up Interest Rates. The two supply shocks that conspired and because the causee inflation to take off. The good news is as those shocks fade into the history books, and that Rearview Mirror that allows inflation to come in without having to push the economy in recession. But that jacks upper rates for the economy so no recession. This whole idea of macular inflation i find it irritating and annoying. It was just a missed diagnosis of what was going on. It was primarily supply. Reason number two for optimism, with inflation coming in and the economy moderating particularly in the labor market and we see more of that as we go forward here Interest Rates are going to come in and my mind a question of when that will recur. I may not be at the mate meaning. On the what after that and the one after that. At the end of the day if my outlook for inflation is roughly right and given the economy started full employment with sub or Unemployment Rate by reserving satisfied dual mandate. The goal of achieving full employment low and stable inflation has been achieved. What you are there i flick were hitting it pretty fast. Why should Interest Rates remain as high as they are . Particularly if you think a long run you target is Something Like expectation the socalled is consistent with Monetary Policy for supporting growth is two and half thats a pretty good gap of three Percentage Points. That does not make a whole lot of sense in the context of you achieved your goals. You are at full employment and youve hit target. I would argue for Interest Rate cuts Going Forward. I will say, this is a sidebar the tuna is probably too low probably higher than that at 3 or three and a half for lots of reasons but the economy is mortal great insensitive than it has been in the passport households and businesses have done a very good job of locking in the previously low Interest Rates extending the maturitys other debt you look up Household Debt service burden that devoting to servicing their debts. Its very low by historical standards. It is rocksolid because people moved into longterm fixed rate mortgages. The Interest Payments by corporate businesses you look at relative to their cash flow that is as low as it has ever been in the data that we have in its data going back and again businesses have done a good job as well. I do think you could argue its rate insensitive than times a if passage of the reasons for that. And therefore maybe two and half maybe its three, three and half. Thats a lot lower than five and a half. I think low rates will help. Particularly are under stress because the higher rates. Lower income low income households they have borrowed aggressively with Consumer Finance loans. Because when inflation was raging they turned to the turn s of debt to supplement their income come to maintain the purchasing power in the debt loads are higher and if the fed cuts rates over flood through lower rates buy now pay later that sort of thing that should be very helpful. Reason number two i would not count on longterm Interest Rates coming down 10 year treasury yields around four and a quarter anything around 4 roughly where they should be in the long run. That will still be quite helpful. So reason number two for optimism here lower Interest Rates. How are you feeling . That its a humming to reasons is going to give you . I will give you two more. And then we will move on. I want to maintain some time here. Third reason for optimism the american consumer. The consumer is hanging tough to keep the economy moving forward. No to something of inflationary pressures with Consumer Spending growth all in. Maybe a little over christmas was really good to me feel stronger than that. Thats exactly where you want to be. The power to maintain their spending, they are Going Forward. Real incomes are rising. Excess savings savings built up during the pandemic is a high income household to a lesser degree middle income. Low income households blew their excess savings. High income, middle income plenty of savings. I can see the deposit account sitting in the Banking System. They are well above what you expected to see savings of cash. Households will turn to that they need to to maintain their spending. I mentioned that service and of know the stock market is down 2 today its up how much since he pandemic . Housing values have picked up. Thats pretty tough if your firsttime home buyer. But if you are a homeowner two thirds of the americans it on their own home you are pretty wealthy according to our measure of house prices house prices nationwide are 50 higher than they were four years ago before the pandemic. 50 higher theres a lot more wealth out there. Lots of good reasons to think were going to hang tough. Consumer sentiment is a bit on the soft side. As a go to for many folks. The way the questions are asked in the way the survey is conducted. Much better to look at the conference boards survey but regardless pick your survey people are starting to feel better now that real wages are rising and a consistent way. The sting of higher inflation is starting to fade people are still upset about having to pay a lot more. Its funny when i have conversation with folks my national inclination is to ask potentially how is your economy . How are things going for you . But of course the last couple three years its been not so good. The economy is not been performing well. We go to whats bugging you the answer basically is some food item that price is a lot higher today than it was three years ago so its talking to students about whats bugging you and its ramen noodles. [laughter] my nieces 23 years old. I ask her whats bugging her . It took a while to get it out of her but came down to some tea come boxer t. [laughter] was on a Conference Call last with a bunch of bankers, a banking group. One banker it was really upset hes paying a lot more for a pound of sugar, who buys a pound of sugar . What you do with the pound of sugar . Are you making it apple tart or something . I dont know but everyone has their food item thats messing with their mind. In time if food prices remain where they are i think that will start to fade people will feel better. To support the consumer and a lot of the economy. One more quick reason and that i am going to run. Fiscal policy is been very supportive of the growth. Particularly in 2023 because of the infrastructure legislation the chips act and the inflation reduction act. Most pieces of legislation of havereally juiced up activity ie manufacturing and construction. You go back preinfrastructure law kind of prebiden annual manufacturing construction put in place 75 billion its pretty rocksolid. Most recent data over 200 billion. The infrastructure is also affecting construction and manufacturing think about that for a second, manufacturing and construction are the most rate sensitive sectors of the economy and and again going back to my point the economy is rate sensitive. Those sensors what kind of flat. You spend on Construction Spending or aggregate spending you go through production. Basically it has gone flat. It is not on down. What you typically see in a world but they are jacking up Interest Rates very aggressively you expect those sectors to take it on the chin and lead those up into a recession that did not go around in a significant part because the fiscal legislation. The sources of support will continue in 2024. Not the same degree in 2025. Theres other sources of growth. Are you feeling now . Thats the pinnacle right there. Lets talk about the risks to the outlook i do think the risks are symmetric i do think theres reasons to be optimistic things could turn out better than i am anticipating. Go to the supply side feels like it has a lot more not be temperate that would be very helpful on the supply side. Lets focus on the Downside Risk and may be symmetric i will give you four reasons. Or nervous system. Reason number one and by the way my goal here at the end of this you are going to feel worse but i want you to be overall feeling better about this. To calibrate that is like the fed trying to jack up the Interest Rate. Just enough to slow things down but not push us into a recession parade that is the idea here. Lets see how good i am at this. These risks feel kind of chronological to me. What could do it most quickly and what may take a little longer may become a problem. Number one oil prices. As i mentioned earlier i forecast many think some i feel confident in some not so much. Oil prices are not so much. And might baseline optimism about the economy i expect places to migrate a little higher i dont know if youve noticed they have been very low. The big surprise here is how significant the pickup and Oil Production. They are producing 13 Million Barrels a day thats as substantive pickup from a year or two ago. That is more than offset off Oil Production by the saudis and the Russian Oil Exports because of the sanctions which was quite modest today. That kept the oil prices down. And i do expect oil prices to migrate higher here a little bit. I expect the economy should be fine. A good chinese economy should improve and continue to improve in 2024. If push comes to shove they will have more for production. Tougher for u. S. Producers to keep ramping it up because of the way they ramped it up its not a sustainable run theyre not investing to the same degree for obvious reasons. I do think prices will move higher from somewhere in the mid 70s to the mid 80s. Which means the cost of a gallon of regular unleaded is going to go from a low almost 2 which is where we were a few weeks ago. I will pay 2. Thats wyoming i think. Cheyenne of the Permian Basin what do you guys pay here in washington . So roughly a National Average. That is how i remember at the national oil price the price is posted that price is exactly the National Average measured by energy information. I dont even know what sites i can seat with the national price. We are expecting to peek out here. But again as i said a lot of risk around that. Nothing does more damage the u. S. Economy and higher oil prices. It undermines real income if they have to put more dollars and their gas tank then they spend on everything else. This undermines peoples views about the economy in their own financial situation it jacks up inflation both by workers it gets into the Wage Structure but also bizarrely look at exploitation. Thats also influenced by oil prices and a reason for the fed not to cut Interest Rates. Is inverted still inverted, even in my expectation of the records, i dont think the curve slope with a long way above the short rates and well into 2025, therefore, thanks another nonbanks are shortterm the money and land long and higher Interest Rates, kind of the most traditional way of making money in the with more difficult to do what is inverted and low growth is slowing coming in the wake of last years banking crisis cylinders have tightened up with their underwriting and so we see much lower loan growth. Growth is been pushing to the nonbank system you can see that in socalled private credit and lending and we can talk about that if youre interested. But the Credit Scores has slowed an aggregate and for Small Businesses that are kimbrough and credit quality is reloading this weakening of the credit quality, pretty good by some standards with the point is, that is moving the wrong direction vertically for commercial real estate and i wont go into that was when dig into it more deeply but well i dont think that it will get into undermine the economy my baseline, theres a reason to nervous that there will be more defaults Going Forward which one when capitol make life more difficult for the banks and on banks and cre particular small banks is when i worry the most of us have the small with the big guys no, if you look at their commercial real estate exposure although was very modest by the temperatures, Mortgage Loans commercial Mortgage Securities the loans to real estate companies, five or 10 percent no big deal of course they capitalize, to large declines in the prices when they take this why dont know if you guys are in the banking but this stress test this year to be released in should be today if it does that, the keep me guessing is when they will recent while waiting for this carpet luster see card, they asked the banks of the big banks to capitalize 40 percent decline and cre prices knows all across assets and property sites has just not going to happen. In a meteor would have to lend washington dc for that happen is not happening. Well yes the rego. Take out some of the property they can do it with yes we dont go there. [laughter] but the small guys, they have larger exposure. They can blow hundred billion in assets, their exposure 25 30 percent of their asset base are much more exposed was we will see more of a failure more small bank failure. My baseline optimism, my view is that through not systemic it is not going to create a problem but you know we did see what happened in the last year or even it was noted systemically Important Bank and we was truly dont thank you so 200 billion making you saw depositors run for the doors going to money markets and Equity Investors sell stock and a vicious cycle and so, i think we can dismiss that because risk number two risk number three the election, they elections were to be close and anybody see my election model know, did not see my election model will oh gosh, was really cool. [laughter] going to describe we should google it, the election mountable sandy and it will go into the all of the gory detail i wont tell you who will win, you have to look with the point of the research what we do have the Electoral College level the state level so we predict sure the mode the goes to the recumbent party and five states the voters it with it one percentage point of the state is going to turn election, my home state of pennsylvania and effect of the entire election involves around my wife. [laughter] yes will she. [laughter] is we live in Chester County pennsylvania outside of philly, that is around zero, thats where the battle will rage is not about well i know who shes about for i know that but what really matters is that she does it with enthusiasm and knocking on doors going to the polls raising money and adding fundraisers and that kind of stuff all eyes are on her. [laughter] telling you but read the paper read the paper is all about pennsylvania and Southeast Pennsylvania in fact we sing the president to knock on my door. It will be contested in close and if its contested, probability is going to be political angst and the markets and who knows how that plays out so you know by the way, the only country in the planet that has elections that are going to be contested, roughly half of the worlds population are replaceable we have to contested elections we will be i think the year of a lot of angst political and finally, reason number four purposes, now long run, physical situation, thats a problem in the commercial Budget Office will budget and released this past week, but under current policy, we have a problem heard and that loan will go from 100 percent publicly traded gp to 100 and whether 60 percent in 180 years from known 30 or smell the forecast i think thats where the end is what you view on forecast of that point and its nonsustainable than hide that, hot averages will on the company, for every increase in the debt load of 1 percent point the gdp is now at went twopoint printed in your field so do arithmetic, hundred percent gp to 180, times say one, is 80 basis points and tenure yelled the goes from 4 percent up to 5 percent, thats a pretty significant weight of the economy some point breaks we have got to make big changes some point. Okay, i meandered with one getting bob at have hour maybe two indicators to watch the gauge, and right and we should be optimistic or wrong going down the alternative path within the economy the strongly at first, every mentioning the survey Consumer Confidence that i it the end of the day a recession is loss of faith of consumers losing faith in do the job the pullback spending. And loss of faith Business People that are going to be able to sell whatever it is that they produce and become back on jobs and in this cycle survey is a very good measure of faith in the good news, less reading, that index 114 average so the beginning of time they been doing this for longtime decade closer to 100 and so we are fine we are good and if you see that measure starting to false in a significant way, and if it falls 20 points, for three months time, were toast consumers are packing it in the would run for longer going to go into a recession and finally, and i am a by market and is why live and breathe and i had to call out the spread between the yield on highyield corporate junk debt and ten year treasury this a measure of the compensation that investors are demanding for the credit are taking and investing in and businesses feel like they economy is struggling the businesses and are to feel the payback on the net and have a way to highyield Interest Rate relative to riskfree treasury yield in the spread widens. The signals of a recession on average than the jump highyield market was on the planet, the average brightest 500 basis points, Percentage Points, and today it is 3. 5 Percentage Points means investors are okay no problem we are in good shape but i would watch it very carefully. Okay come i am. Right there and thank you. [applause] [applause] it looks like we have a few minutes for question please keep them short. And he could restate the question in terms that would be great. Okay sure. Okay mark free and think you very much for being here. My question is why or why is 2 Percent Inflation target desirable why would it a 0 Percent Inflation target over time be preferable up to the 2 percent. So bert asked, will the phillies win the world series. [laughter] [laughter] and the answer is no. Good question and interestingly, very consistent with your kind of iconoclastic perspective on the world because most people would say, why do Percent Inflation rate right 3 percent but over says them up when a zero percentage inflation rate. [laughter] [laughter] well i think the answer for mother many as of the answer the resignation most with me is that if it is zero, that means half of the economy is experiencing deflation in the businesses in half of the academy having price claims now avoid to speak to you as a business person that is very difficult to happen. You gotta go back to your workers and you say going to get your wages category defectors expenses and how to manage with the goods and services of falling prices i can try, but in telling you is very very difficult to do and why do that. 2 percent i think is chosen in part because if youre at two, most businesses are going to experience positive price increases is something about zero will be some experiencing deflation with generally, the role of rising is goes back to the thinking that wages are sticky so the businesses that cut prices, they cannot cut wages, like is very difficult because they start to get the workers in the economy and i would argue just the opposite and i would say, why sacrifice the economy to the 2 Percent Inflation, particularly the world of slow growth. Without a world of you know phenomenal 4 percent and so that suggests that if you get into kind of a recession, the fundraisers almost invariably going to go to zero, and the feds are the position of having to well do i do this at the point or longterm interlaced i think based on the conversation argue that visually the distortionary so if youre three, then they are much less likely in a variety of the recession it will give you more room to navigate. Now getting from the current 2 Percent Inflation 3 Percent Inflation rate why dont know how you pull that off, gracefully but is very difficult, this would undermine Inflation Expectations and certainly do not want to do that until youre back out to when to get back into, think okay, anything of the framework the central bank is operating of the maybe we can raise it but i think zero would be a mistake i would argue 40 change the inflation, i would races to something closer than three more consistent with the wind growth rate and with the economy. I am wondering to what extent Rising Consumer debt in the default rate of the Consumer Credit cards and so forth, how does that factor into your assessment of the optimism in the consumer realm. Sure, you tweet. No. All you should tweet. Are you should go twitter and follow me. [laughter] [laughter] just tweeted this very issue. And, you can follow me mark zandi. Holly springs in a second. And yes the Consumer Debt is an issue predict a letter for that are in the bottom one third of the Income Distribution entity think of you back your to go, when the inflation was raging, many households many lower income households have blown through their excess savings and inserted credit cards consumer financing, to supplement their income. And, the other thing that happened in 2021 and 2022, when the inflation was racing, the lenders lowered the underwriting standards. In the credit score inflation because if you back to the pieces of the legislation during the pandemic, beginning the cares act on the way through the American Rescue plan, and the legislation is said that lender should not report to the Credit Bureau the problems the borrowers having because the thinking was that this was no problems of no fault of their own but we dont want there chris course be impaired by this insult they caused the Credit Scores to improve as of the lenders Consumer Finance, this in Tech Companies came into this and extended the credit at that point in the Interest Rates were very low so she tomorrow avenue point of 2022 then you saw a lot of credit growth that ultimately resulted in much higher delinquencies. All of the way up until late last year and the good news, good news is that helping inflation is back in, the wage growth is stronger than inflation borrowing has cooled off and the lenders have tightened down the wake of the pandemic. Making prices, and of course Interest Rates are higher so make too much more costly so weve seen very significant sent down in credit growth. Over the past year. Infected is still growing this point in aggregate predict an outcome of delinquency rates have picked and appeared to have peaked in my sense is when they cut the rates which i anticipate will see the default rates coming in the second half of this year going into 2024 and also 2025 is i think will pass the worst of it but it doesnt turn into my thinking. At the end of the day, heres a muscle scary factoid, the top one third of the Income Distribution, accounts for two thirds of the spending in the sense of where the spending comes from. Yes. What about the sovereign debt and particularly you know what we see going through the pipe bomb of just the amount of credit is being put out legally among the sovereign that. I can kind of limit that to the higher Income Countries because understand the low Income Countries, the higher incomes, theres a lot of paper going out there, not just the short fault. The issue that is ended on, and the risk that is here in the office, significant increase in our debt load and you know if you go back for the financial crisis in the ratio was 4050 percent this kind of work is been the wake of world war ii all the way until financial crisis and i were at 100 percent and the trendline know we change policy suggests will racing to be alive or not the only country in the world is doing this. Everyone is the exception will be germany and by the way so the reason whys german is struggling to stay out of recession at the moment because being very cautious in their use of the balance sheet. Compared to other countries this probably pays off in the long run maybe because a part of your but its a gamble and you know thats the only country not doing it. I dont suggest theres going to be a lot of sovereign debt being issued Going Forward and a do think is going to put higher on Interest Rates and they will slowly move up and up and that ultimately becomes unsustainable right because you put that into your interest expense is already rising pretty quickly and you know at some point, you pay so much in interest as you know you get into the well you run out of space and you have a crisis and then something about it possibly has never done before see default of this lacey Rating Agency panfried. From aaa monies list and aaa rating on negative as a result. This is part of the process unfolding so we need to make changes and you know this may be helpful or wishful but my sense is that when push comes to shove, we will make changes necessary to ensure the sustainability in the next test of that will be on the other side of the election 2025, because thats when we have to raise the debt limit again and that is when the trump tax cuts need to be addressed to the buyer i think some of the obama tax credits for obama care has come to listen pretty time propitious is that a good word. We dont use anymore but propitious. Is the time to address that in some of these issues is interesting and if we make changes, has longterm consequences i dont know if you notice, you go to the cdo of budget was actually better than it was also because the fra right and so solid you have to think we do it if he said the time. Editing the lawmakers cannot make the changes the need to make until the elector say make it. They have to connect the dots lawmakers have to connect the dots in the minds of the electorate and white we need to make the changes is almost like you need to hire or some kind of hesitates a crisis was some type of an event to sale my gosh, maybe it is Something Like mom spending more and is that make sense to anybody, by the way who is buying those bots right think about whos buying bonds and so were getting or selling a more on interest for Foreign Investors than in our own defense does anybody think that makes sense does anybody know so is a point where i think that we you know we make some hard choices like that adage, and void which are think will be the point, americans try everything into the do the right thing. And there it is you know it so just make myself feel better, every night and recite that. Yes read. Thank you barred from having heard of su to comment about the shortterm because normally deficit of five 7 percent of l employment him is like a red light as less likely usually should try not to do that read as a benign thing is that risk and what is your take on that situation. Will i think that the reasoning behind the situation that we are in, is set and several fold and one is until recently the Interest Rates were very low. The rates were below the gpd gives you a lot of latitude and so, the kind of has a green light to do something that we need to do and long Term Investments that we would be able to do otherwise infrastructure. And for the folks that like i do, the climate is issue. And these are Big Investments in the costly we cannot find the political carbon tax which is probably will probably what we should do. Therefore criminal hold down the root and secondly, the pandemic later bear some pretty Significant National Security Risk you know in my view the chips act as National Security and we were in that very clearly that we are very dependent on taiwan and of course given the relationship with china and taiwan lives a very good choice we had to do something about that and quickly. So that was costly you know there were some things that we needed an infrastructure, you can argue that is an investment not an expenditure we needed to do that so i think theres a real logic to what was done here we are Interest Rates are now higher this way it works all of a sudden that there higher. But without going on and liberal changes and you have to adapt to that and thats where we are to that we have to adapt to that new reality and 4 percent is noted 2 percent and i think while yes theres another question here. Something that i am wondering, coverage of the cre risk and the makes in geography and properties because i know essential real estate is like 8l estate and is nonperforming is poorly is like for example. While yes, the real problem is the office in downtown urban centers in the northeast chicago on the west coast. The retail runners downtown areas goes to the remote fundamentally to the remote work and if you look at occupancy in Office Buildings in major cities, like dc, it depends on the city but your back to 50 or 60 or 70 percent of the pre pandemic occupancies and if that is the world you are now in, the economics change dramatically in the Interest Rates roses that were in a very low rate environment hour and a high rate environment fundamentals have changed significantly so you have to adjust event events what is happening the prices up to come down as a comedown, embraces rent potential risk and lays the foundation for the adjustments you need to make some point, you know conversion of office into multifamily makes sense right and theres a big project on the circle with trying to make that work in the economic has not quite gotten there but maybe at some point it probably will. And one thing that ive learned because these folks my clients, never underestimate the creativity of commercial real estate developer. [laughter] [laughter] they are pretty darned creative, and they will figure something out i keep thinking theyre going to turn some of these office hours and forage areas into canvas. [laughter] [laughter] ive heard a lot about why joe green farming. And i dont know if that will be enough to make it opens a lot but they will figure it out. And if you look in out of silver areas, theres really no problem. In terms of mouse properties. So big deal. Youre right, is not universal you cannot pay with a broad brush and you have to be circumspect about how you think about the things like in most issues right. Talk to bert about the class a year ago and i say will i was very upset that he didnt see it because im an economist and look at the world at 30000foot level and people driving down to 20 and i sometimes will go 210 and if you get come i run out of oxygen. So im looking at averages and medians and im not looking at the distributions that is a massive error especially when youre in the Banking System the financial system, and if you really want to understand the problem, you have to look at the average and median and the distribution. The distribution, he was the that sitting out there like you know like what heck is going on over there. And so the same with commercial properties. I have a question here. The trust fund balances, you know going to zero, will that trigger something. Yes of the question is, given the Social Security Medicare Medicaid are headed towards will the whole solvency and it will not be the catalyst for change could make could be changed well i think that everybody is thinking the lawmakers will ultimately pay up figure out how to pay Social Security to the recipients of the current benefits but you know, they might have a political dynamic with that might not be obvious and is not obvious, i dont think it will stand politically there will be changes so that is a possibility trigger point. And i think have one question back here. I was curious what your take was on ghost jobs, ghost jobs. For those that will jobs are posted today and employees are not necessarily filling them or maybe looking for the perfect candidate to fill the urgency to fill them. And i was wondering what your take on that was be back while yes thats where he question about unfilled can seize. Still elevated and if you look at the job opening they deliver turnover the number of vacant jobs of comedown substantially from where they were saying year or year and have ago with her so high relative to the pandemic and so if you look at that is negative face value this very tight and i think it overstates the case by orders of magnitude those jobs is a good description of it ultimately, low cost to maintain open positions and you just slow watch trying to fill them. We do that well is a business person, we do that as well right because well heres the thing, once you taken the position any hundred shut down your hr function, very difficult to revit backup and you know you want to keep to take resumes you want to keep talking to people even though you not going to pull the trigger, the bar is very high to hire somebody you do not want to shut down the process because you know to get that going to get is going to be incredibly costly and difficult to do so we keep the machinery going so my thought is that until the position is overstating the case it was probably more consistent with that historical moment in the market is otherwise softening and if you look at while the only place you go see this is job vacancy and maybe in these jobs numbers, maybe there 250k but if you look at hours of work, has fallen sharply this back to kind of a recession level if you look at hiring rates, that is falling sharply and post recession if you look at the normalized it back to pre pandemic so is cooled off quite substantially i think that we shall be focused on that and by the way in the place for the conference got it wrong because the focus on that statistic is a look, how are you going to solve this problem we have to push the economy into a recession. Because many of our Business People, they didnt see or understand that statistic was probably well line and talk about the jolts, and the Response Rates recently they are to the floor. Same with the Employment Survey and so all data is becoming a little bit more difficult to interpret certainly month to month. The answer is yes. Which is a large insurance ground zero. They do scores for claimant risk of chronic risk weve taken those and brought them into our modeling particular on housing values and cred. Here is one fascinating thing though. I have worked very hard specifically to tease out the impact on climate on house prices, because i have a home in florida. [laughter] but it is very difficult to tease out so far. Now it may be the Housing Market is so wacko so supply constraint and people are moving from northeast down into florida and texas so its very difficult to disentangle i would expect this will have an impact on price. And on the commercial side its built into our forecast, yes. So far its very difficult to tease out. [inaudible] looks large swaths of america . Works states are stepping in or people are selfinsuring big commercials are saying is going to cost me 500,000 for some purpose complex. For five and the thousand dollars i can replace the entire roof so im just not going to do it. Were seeing a lot more selfinsurance. Which, by the way it may mean more onus on government to step in. If you look at natural disasters in the last 50 years and you look at Property Damage and compare it to Insurance Plus Government Support its almost oneforone. So those place have less insurance get more Government Support. That took a lot of time, you were very attentive and i strive to be 51 right anyway thank you very much, thank you. [applause] [inaudible conversations]