INSIDE ECONOMICS

Mark Zandi:                      Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics. And this is a special podcast. I don't know why it's special, but we're going to figure that out somehow, some way. I'm joined by three of my colleagues, my two co-hosts Ryan Sweet. Mr. Sweet, how are you doing?

Ryan Sweet:                      I'm good. How was the gym?

Mark Zandi:                      Gym was good. We did a podcast earlier today. This is Friday, April what? 22nd. And after the podcast, I called my, I'll be nice, my gym. We were just talking about that. I just discovered Guns N' Roses. Apparently that was a big deal when I was in my twenties. But I was in the library in my twenties. I don't what you guys were doing in your twenties, but I was in the library. So I missed Guns N' Roses somehow. Do you know Guns N' Roses, Ryan?

Ryan Sweet:                      Yes, of course.

Mark Zandi:                      It's not a trick question.

Ryan Sweet:                      I actually saw them in concert.

Mark Zandi:                      Wow.

Ryan Sweet:                      Yeah, I saw them in Philly

Mark Zandi:                      Were they any good?

Ryan Sweet:                      They're very good.

Mark Zandi:                      Phenomenal.

Ryan Sweet:                      Yeah, there was moments where I'm like, "I don't know if I'm going to get out of here alive." But it was good. Yeah, it was a good concert.

Mark Zandi:                      Yeah. I was just telling Ryan, I had this gym where I can go in 24/7 and it's a grunge gym. It's really old equipment, that kind of thing. But the thing I love about it is that it's a 24/7, I go in and half the time, I'm the only person in there. And I could turn on the music. I open up the doors and I turn on the music and I frankly don't know how to really find the right music. So whatever's playing, I play. Today, they had this medley of classics, I guess. And then I heard Welcome to the Jungle and I go, "Who is that?" And I go, "That is fantastic." I'm not sure it reveals too much. I'm just saying it's a good tune, a really good tune. And so-

Ryan Sweet:                      It upsets me that they're labeling it as a classic.

Mark Zandi:                      Yeah, I think it's a classic. I think it's a classic now. Yeah, yeah. Anyway, we got Mr. deRitis, Dr. deRitis. Cris, how are you?

Cris deRitis:                       I'm doing well. I'm worried though. Is this like a fight club situation you got going on there? We need to intervene.

Mark Zandi:                      No, no, no, no. Fight club would then be between me and myself, because I'm the only one in there.

Cris deRitis:                       Well, that's what I'm thinking. You're at gym there. You're all alone.

Mark Zandi:                      Good point. Good point. Wow. I hadn't thought of it that way. Yeah. It's a little scary now that I think about it. Yeah.

Cris deRitis:                       But you're okay. All right. Good.

Mark Zandi:                      Yeah. Yeah. I have to be a little careful because if I drop a weight on my neck, I'm a dead man. Because I literally am the only person in there at times. But so do you like Guns N' Roses?

Cris deRitis:                       I've heard of Guns N' Roses. [crosstalk 00:03:09].

Mark Zandi:                      Geez.

Cris deRitis:                       Am I a big? Not exactly, but it's okay. They've got some good songs.

Mark Zandi:                      I think actually this is the purpose of this podcast to get to know us a little bit better. So it's okay that I'm asking these questions? Okay.

Cris deRitis:                       Oh yeah.

Mark Zandi:                      Okay. So what about Counting Crows? Do you like them?

Cris deRitis:                       Yeah.

Mark Zandi:                      Yeah. They're good. Yeah. They're good.

Cris deRitis:                       That's my generation.

Mark Zandi:                      What about Red Hot Chili Peppers? Is it Red Hot Chili Pepper?

Cris deRitis:                       Yeah.

Mark Zandi:                      Yeah.

Cris deRitis:                       Yeah.

Mark Zandi:                      They're good too. Yeah.

Cris deRitis:                       Absolutely.

Mark Zandi:                      Okay. Very good.

Cris deRitis:                       What about the Beatles?

Mark Zandi:                      I love the Beatles, but the problem with the Beatles., it's just a problem that's not going to ever be solved is I've listened to them so many times that it just doesn't have the same feel. When you hear Welcome to the Jungle for the first time you go, "Oh, that's pretty cool." And after the fifth time you're going, "Ah, this is not so good." By the 10th time you don't want to hear it again. With the Beatles after the 50th time, then you say, "I don't want to listen to it again." Although I did hear Hey Jude the other day, and I really liked it. It was very good.

Cris deRitis:                       There you go.

Mark Zandi:                      Anyway, we got Emily. Emily Mandel. Emily, welcome.

Emily Mandel:                  Thank you. Happy to be on this.

Mark Zandi:                      Well, okay. Do you know Guns N' Roses?

Emily Mandel:                  I do. I think you're definitely in the minority on this one part.

Mark Zandi:                      Really?

Emily Mandel:                  [crosstalk 00:04:26].

Ryan Sweet:                      Oh and Cris. Emily, it's you and I. Cris really hadn't heard of Guns N' Roses.

Mark Zandi:                      Okay.

Cris deRitis:                       Oh come on, I've heard of them.

Emily Mandel:                  You recognize them?

Mark Zandi:                      I'm always in the hunt for tunes. You know why? Because when I run, I need tunes. Or I go to the gym, I need tunes. And I have a hard time getting tunes out of my kids. They won't really tell me what they're listening to, which scares me. I don't know what that means exactly. What are they listening to? But I need tunes. So what should I be listening to?

Cris deRitis:                       Wait, wait. You're not listening to the Inside Economics podcast while you run?

Mark Zandi:                      Actually, sometimes I do. Not when I run. No. But when I'm trying to pump a little iron, as they say. And by the way, don't get the wrong impression. I have no muscle mass whatsoever. I just do this to survive. I will listen to the podcast. Actually, it's a good weightlifting recommendation to listener. If you aren't going to the gym, go to the gym and put on this podcast, it really helps out. Ryan's laughing.

Ryan Sweet:                      I'm just picturing my wife now, picturing my wife at the gym listening to this. I'll fall off the treadmill.

Mark Zandi:                      I don't make this stuff up. This is true. This is true. Right, Emily? Emily. This is a critical question. Critical. In fact, this is actually vital. Do you listen to the Inside Economics podcast?

Emily Mandel:                  I have listened to the Inside Economic podcast.

Mark Zandi:                      Geez Louise.

Cris deRitis:                       [crosstalk 00:06:05].

Mark Zandi:                      You're playing a key role here. You're a moderator. You're going to moderate questions. You're going to fire questions at us. But we need a loyal listener. Would you consider yourself a loyal listener?

Emily Mandel:                  From about a week ago on.

Mark Zandi:                      Okay.

Cris deRitis:                       Have you subscribed to the podcast?

Mark Zandi:                      Have you subscribed to the podcast, Emily? Be honest now. Oh, [crosstalk 00:06:31].

Cris deRitis:                       That's all we're asking. That's all we're asking.

Mark Zandi:                      This is really-

Emily Mandel:                  I overloaded on podcast a couple years back and I had to stage an intervention for myself. So I don't have any current podcast subscriptions. So it's not like you guys are [crosstalk 00:06:42] left now.

Mark Zandi:                      Okay. That's fair. Fair enough.

Emily Mandel:                  Yeah.

Mark Zandi:                      Okay. Emily, before you ask us questions, we're going to ask you questions. Okay? In fact, this may take the entire hour, so I'm just saying.

Emily Mandel:                  So we'll lose a couple listeners on that.

Mark Zandi:                      Oh, just a couple. Okay. All right. Okay. You run and think about all our state and local government work and you've got this great mentor, Dan White, who we've had on the podcast before. But you've taken over a lot of the work on the state and local government side. How long have you been doing this? Well, I can't even remember. How long have you been doing this?

Emily Mandel:                  Well, I've been with Moody's for about maybe six and a half years now.

Mark Zandi:                      Six? Okay. Okay. Very good.

Emily Mandel:                  Close enough that I should probably stop counting the house. And then I've been ramping up my work on the government side since then. And probably started doing quite a bit more maybe near the start part of the pandemic a couple years. Or a year before that.

Mark Zandi:                      Oh you do a great job. Okay. You do know, or I'm assuming you know, you should know, that as part of this podcast, we play a statistics game. Are you aware of the statistics game?

Emily Mandel:                  I am, yes.

Mark Zandi:                      Okay. Very good. Okay. I got a statistic for you. You ready?

Emily Mandel:                  Oh no. Okay.

Mark Zandi:                      Now come on.

Emily Mandel:                  I'm listening.

Mark Zandi:                      And Ryan and Cris, if you know the answer, you can just raise your hand, but you can't call it out loud.

Ryan Sweet:                      All right.

Cris deRitis:                       All right.

Mark Zandi:                      All right, Emily. And this is Taylor made for you, Emily. That's a clue by the way.

Emily Mandel:                  Okay.

Mark Zandi:                      25%. 25%.

Emily Mandel:                  This from that chart I sent you.

Mark Zandi:                      Oh, very good. Ding, ding, ding, ding. Okay, what is the chart you sent me?

Emily Mandel:                  Yeah, this is the basically how much states have in reserves at the end of fiscal 2021. So their ending balances. Plus the rainy day funds as a share of their total revenues, they put this together.

Mark Zandi:                      25% nationwide.

Emily Mandel:                  25%, which is absolutely huge by historical standards. States have just sucked away so much cash over the past couple years.

Mark Zandi:                      Yeah, exactly. So what's the average? Okay. Here's a bonus question.

Emily Mandel:                  Okay.

Mark Zandi:                      You should know the answer to this.

Emily Mandel:                  Should.

Mark Zandi:                      What is the average or typical ratio of rainy day plus end of balance general funds over the general fund, which is basically how much cash do I have out there that I can use if I get into a scrape, if I'm a state government, typical.

Emily Mandel:                  I'm going to make this up. Maybe around 12.

Mark Zandi:                      Ding, ding, ding, ding, ding. You got it. Yeah. Very good. So it's double. Right now it's double. And that goes to I think, well, one just the strong economy, all the revenues that are being generated because of income tax and capital gains and of course house prices are going skywards of property taxes. Sales taxes, everyone's spending a lot of money. And then of course all the support from the federal government through the American Rescue Plan. That's got to be part of it.

Emily Mandel:                  Yeah. Definitely. I think also states really slash their planned expenditures for fiscal 2021. Because they didn't realize just how good everything would be. So that's also given them a bit more to play with.

Mark Zandi:                      Yeah. Great point. So right now-

Cris deRitis:                       Can I ask a question?

Mark Zandi:                      ... governments are in great financial shape.

Cris deRitis:                       Can I ask which states in the best position?

Mark Zandi:                      Yeah. Good question.

Emily Mandel:                  I think we're going to have to hold off on this one for a week or two. I'm putting together our annual stress testing of states report and that's going to give us a good sense of how they're going. Because some of them have more cash on hand, but they might be [crosstalk 00:10:23].

Mark Zandi:                      Emily sent me a spreadsheet by state and I just haven't had time to calculate.

Emily Mandel:                  I have that also. Yeah. It's usually your energy states that have the most actual cash on a hand, but that doesn't necessarily...

Cris deRitis:                       Then you have Dakota.

Emily Mandel:                  They get stressed more. Yeah.

Cris deRitis:                       Yeah.

Mark Zandi:                      Okay. Excellent. All right. You did well on the game. Just saying. Better than Ryan does. Jesus, Ryan [crosstalk 00:10:44].

Cris deRitis:                       I think that's a cowbell if you have it, Ryan.

Mark Zandi:                      You need a cowbell.

Cris deRitis:                       This is why we need-

Mark Zandi:                      Carl's going to take the way the last of your cowbells, if you're not careful.

Ryan Sweet:                      Okay. All right.

Cris deRitis:                       We need to get you a cowbell so you can stop going ding, ding, ding. [crosstalk 00:10:57] a cowbell.

Mark Zandi:                      Well, you see-

Cris deRitis:                       Here's your pitch.

Mark Zandi:                      ... I innovate. Since I don't have a cowbell, I innovate. I like the ding, ding, ding thing, actually, but anyway. Okay Emily, you're up. So what are we doing here? You have a few questions for us. And so this is questions that are from our colleagues or Moody's Analytics colleagues. I guess Moody's more broadly. And these are a mix of questions that are econ related. So what's going on in the economy related and also I guess, more-

Emily Mandel:                  Personal.

Mark Zandi:                      Personal. They want to learn more about the folks on the podcast. Okay. All right.

Emily Mandel:                  Yeah. And we've got some here from outside listeners, so not just [crosstalk 00:11:40].

Mark Zandi:                      Oh we do? Okay. Very great. Yeah. Okay. Very good. But I'm just saying Emily, if you're a regular listener, you know us pretty well by now. We drink Wawa coffee. Or I do. Not Cris.

Emily Mandel:                  I knew that before this podcast.

Ryan Sweet:                      Yeah.

Mark Zandi:                      Cris drinks Shishi. Whatever. I don't know.

Cris deRitis:                       I get the Shishi Wawa coffee.

Mark Zandi:                      Shishi Wawa coffee. And you know that Ryan hangs out at Hershey Park regularly. Blows us off on a pretty frequent basis.

Ryan Sweet:                      It's one podcast. One podcast.

Mark Zandi:                      I'm just telling them.

Cris deRitis:                       It's the yield curve.

Mark Zandi:                      It's the yield curve. Oh no, he's a skeptic.

Cris deRitis:                       A skeptic.

Mark Zandi:                      He's telling he's a skeptic. Yield curve skeptic. Anyway, fire away, Emily.

Emily Mandel:                  Okay. So to kick us off, and this is a question for Cris or Ryan, has Mark convinced either of you to increase your supply of power washers?

Ryan Sweet:                      That's a very good one.

Mark Zandi:                      Explain that though. Someone's got to explain that.

Ryan Sweet:                      So I'll explain it. So one of the early podcasts, we're talking about the American consumer and how we're buying a ton of stuff. And Mark mentioned that he owns two power washers and Cris and I were puzzled. Why would you have two power washers? And Cris mentioned, you have to have two to have one to wash the other one.

Mark Zandi:                      It's true. It's true. Actually the whole power washer thing, I now look at every structure through the prism of a power washer. Should this thing be power washed? It's really weird. I've got a list of structures I would like to power wash.

Ryan Sweet:                      Don't do your car. Totally you don't to power wash your car.

Mark Zandi:                      Really? You're not supposed to do your car.

Ryan Sweet:                      Yeah. You're not supposed to power wash your car.

Cris deRitis:                       Wait, wait, wait, wait. When you go to car wash that's self-serve, it is a power washer, right?

Ryan Sweet:                      You got to be careful. You got [crosstalk 00:13:41] nozzle. Oh yeah.

Mark Zandi:                      Oh, okay.

Ryan Sweet:                      It will take that paint right off. That's why.

Mark Zandi:                      That's good to know. Yeah. That's good to know. All right.

Ryan Sweet:                      Mark comes in and his car's got a stripe [crosstalk 00:13:50] side we'll know he tried power washing it.

Mark Zandi:                      Oh, but do you guys have power washers? Do you have a power washer?

Cris deRitis:                       You do?

Ryan Sweet:                      I do not.

Cris deRitis:                       Cris does not. And Emily, do you have a power washer?

Emily Mandel:                  I don't have a yard. So I would not like to power wash the inside of my apartment. So no, I do not have one.

Mark Zandi:                      Oh. Oh. So you're not a homeowner at this point?

Emily Mandel:                  No, not at this point.

Mark Zandi:                      Oh, okay.

Ryan Sweet:                      Just wait.

Emily Mandel:                  [crosstalk 00:14:12] housing market.

Mark Zandi:                      Just wait. Yeah.

Ryan Sweet:                      The power washer's crucial.

Mark Zandi:                      Yeah. How do are you thinking about what's going on in the housing market, Emily? With the run up in mortgage rates. Are you even thinking about buying a home or not yet?

Emily Mandel:                  Yeah. I've been thinking about it. I moved to Massachusetts about a year ago and we were really looking into the housing market here, into wanting to get something when they moved. But at that point the supply was pretty much all gone and now I don't know, just settling into the apartment I think for a while.

Mark Zandi:                      Yeah. I think Boston in particular, the inventory, there's zero inventory. There's nothing for sale. It's pretty incredible.

Cris deRitis:                       It's crazy. Yeah.

Mark Zandi:                      Yeah. Yeah. All right. Well-

Cris deRitis:                       Just wait. Just wait.

Mark Zandi:                      Obviously I didn't convince anyone to get a second power washer.

Ryan Sweet:                      I'm actually thinking about getting a second one.

Mark Zandi:                      I'll rent you mine, Cris.

Cris deRitis:                       I'll just stop over if I ever need one.

Ryan Sweet:                      I think there's a good argument to have two. One for the front yard, one for the back, because wheeling thing around with the hose is a pain in the butt.

Mark Zandi:                      That is a good point;.

Ryan Sweet:                      So I'm actually thinking two power washers might make sense.

Mark Zandi:                      That is a good point actually. Because they are unwieldy things, these power washers.

Emily Mandel:                  I think I'm going to try to keep us moving on this one. Because I have a billion questions.

Mark Zandi:                      As you can see, we can talk about anything forever. It doesn't matter. It doesn't matter.

Emily Mandel:                  I think this will be a shorter one. But a formal employee, Alex Lowy. And Alex would to know everyone's view on the correct pronunciation of precis.

Mark Zandi:                      Ah yeah. Well precis, how do you guys say it? How do you say it? Emily? You said precis, right?

Emily Mandel:                  Yeah.

Mark Zandi:                      Yeah. And Ryan, how do you say it?

Emily Mandel:                  Precis?

Mark Zandi:                      Well, you invented the word, I think.

Ryan Sweet:                      No I didn't. No.

Mark Zandi:                      You did not. Okay.

Ryan Sweet:                      I thought there's only one way to say it.

Mark Zandi:                      Well, no, forever clients would say pricey. I said, no, it's not pricey. It's spelled P-R-E-C-I-S and it's French. And is it accent [inaudible 00:16:12] is or no. Circumflex. It's the circumflex over the uh. I'm having too much fun.

Ryan Sweet:                      Should we mention what precis actually means? Doesn't precis mean short report?

Mark Zandi:                      Yeah. It means summary. Summary. [crosstalk 00:16:36] Yeah. So that was the idea. These were precis we did for Metro area state economies. And so there's a 600 word precis, a summary of what our thought process was around what was going on and what the outlook was for these areas. So clients really got confused by that. They would call it pricey. And of course that's not what we wanted. That wasn't the marketing that we had in mind, it's a precis. Precis.

Cris deRitis:                       But Cris, were you the originator of the term?

Mark Zandi:                      No, no, no, no. A Paul. Paul Getman. So Paul, I and Carl started this company back in 1990 and P I think it was Paul. I was pretty sure it was Paul, came up with the precis. He was a big fan of Value Line. Does anyone know Value Line?

Cris deRitis:                       Oh yeah.

Mark Zandi:                      For stocks. So I don't know, is Value Line's still around? I'm not even sure. But back in the day Value Line would create a precis-like analysis of companies for stock investors. So you could go look at IBM, for example, or GE, GM. And on one page you would get all this vital statistics and analysis and he is a great stock picker. People don't know that, but Paul is a fantastic investor. And ha done really well investing in a lot of biotech and energy and infrastructure. And so he was really into these Value Line reports and he just said, "Okay, we should do that for economies." And om that really was the product that drove enormous growth early in the company's history, back in the 90s and early part of the 2000s. That was the engine of growth at that time.

Cris deRitis:                       It's still a foundation, right?

Mark Zandi:                      It's still. It's very key. And it's actually very therapeutic way of writing because you can't just go on and on and on like Emily does, when she writes about state local government. She just goes on and on and on. But you-

Cris deRitis:                       Or like this podcast

Mark Zandi:                      Or like this podcast. Yeah. Like this podcast.

Emily Mandel:                  Good example.

Mark Zandi:                      What with the Zandi guy going on and on and on. But yeah, it's 600 words. Is that right? It's still 600 words. I haven't lost track? Is it Ryan?

Ryan Sweet:                      Still 600.

Mark Zandi:                      Yeah. Still 600 words. I don't know why 600 exactly. That's a good question. I'm not sure. I'm surprised Alex didn't ask that. Well, how's he doing by the way? Does anyone know? He went to off the University of Michigan to get a MBA. He should be graduated by now. He should be CEO of some company by now. No? He's not? Does anyone know?

Emily Mandel:                  I don't know where he is at.

Mark Zandi:                      Yeah. We should find out. Yeah. Anyway. All right.

Emily Mandel:                  Okay. So shifting over to economics a little bit more here, and I guess this is each of you or whoever chooses to. What's your biggest worry for the economy 5 to 10 years from now.

Mark Zandi:                      Ooh, good one. Cris, you want to go? Ryan?

Cris deRitis:                       Well, I guess I would-

Mark Zandi:                      In 10 years from now.

Cris deRitis:                       Yeah. 5, 10 years, and for that timeframe, for me it always comes down to demographics and productivity. So those are the two that come to mind. And of the two, I'm actually more worried about the demographics. Because as I think about say the housing market, population growth is slowing here. The number of household formations I expect to slow down significantly. While you have a lot of house price stress today, 10 years from now, I think we could very well have the opposite, more supply than demand.

Mark Zandi:                      Yeah. Yeah. That's a good one. Ryan?

Ryan Sweet:                      Always think demographics. And I think increasingly I'm getting more concerned about inequality.

Mark Zandi:                      Inequality? Anything in particular?

Ryan Sweet:                      Getting even worse over the next 5 to 10 years.

Mark Zandi:                      Really.? Why do you think so?

Ryan Sweet:                      Just we're going to have another recession at some point and then the stock market corrects, but then comes roaring back. And my gut is that inequality's going to get worse before it gets better.

Mark Zandi:                      Yeah. I'll take the other side of that actually.

Ryan Sweet:                      Okay.

Mark Zandi:                      Yeah.

Ryan Sweet:                      I hope you're right.

Mark Zandi:                      Yeah. Yeah. In my view, the inequality that we've seen, the increasing inequality, wealth and income inequality we've seen since, really, since the late seventies, early eighties is the function of a lot of things. But three key things. One is in no order of importance, globalization. And particularly China's entry into the WTO back in the early 2000, that opened up the labor market for very low paid workers in the rest of the world that wiped out a lot of jobs here in the US. Second is technology targeted towards more routine kinds of labor activities, particularly for low middle income workers hollows out the middle. And people who lose their job in the middle due to technology tend to go down the income distribution, not up the income distribution. And third demographics that in the 80s, 90s, 2000s really up until recently, the demographics were favorable for lots of labor. Strong labor force growth and also increases in participation because of female participation rates increasing quite dramatically in that period. And of course the boomers and immigration.

                                             Now, if you that's the diagnosis for what's behind the increase in income inequality, now think about what's happening going forward. Globalization is going on in reverse. We're de-globalizing. And by the way, that would be my answer, Emily, as to what I worry about the most. Because even though globalization is a key factor in driving income inequality, it's also been a boon to overall economic growth. And it's been bad policy that has failed to make sure that the benefits of that globalization doesn't accrue to everyone more equally. It's really accrued to folks like us at the top end of the income distribution, because we can sell what we produce to the rest of the world. But that's going in reverse. And second, Cris said it. On the labor market side, we're in a world of incredibly, abstracting from the vagaries of the business cycle, a very tight labor market.

                                             Labor has got the upper hand here and I think they're going to continue to have the upper hand going forward. And they're going to grab more of the benefits of increasing improvements in technology and labor productivity. The reverse of what happened in the 80s, 90s and 2000, 2010, when most of the benefits of the improvement in productivity and technological progress went to upper income households. The only thing that would continue the way on-

Ryan Sweet:                      What about the argument that-

Mark Zandi:                      I was going to say one more thing. The only thing on technology that will continue to be a source of pressure on the income in wealth distribution. But I don't see that getting any worse than it has been in the last 20 or 30 years. So I'll stop right there. What were you going to say Ryan?

Ryan Sweet:                      The argument that the labor share of income really hasn't changed. So still most of it's going towards corporations and labor share of income is still where it was pre-pandemic. So for your argument, when you argue that needs to improve?

Mark Zandi:                      Well, the labor share is down from where it was in the 70s and 80s. It's-

Ryan Sweet:                      Oh yeah, but there's been no improvement since pre-pandemic.

Mark Zandi:                      PI thought we were talking about this longer term though. We're talking about-

Ryan Sweet:                      Well, my argument is we just started seeing some seeds that labor share of income, given this tightness of the labor market.

Mark Zandi:                      Oh, it's going to happen. It's too early. It's going to happen.

Ryan Sweet:                      Too early.

Mark Zandi:                      Is what I'm saying. I'm saying 10 years from now, because the question was 10 years from the labor share's going to be much higher than it is today.

Cris deRitis:                       Yeah. Yeah. Interesting. So usually we think of the three Ts when it comes to inequality, trade, technology and taxes, but you didn't measure taxes and changes to tax policy.

Mark Zandi:                      Well, it's hard to see change. Tax policy certainly that actually helped to exacerbate this. [inaudible 00:25:13]. I don't see that changing though. I don't see it getting worse going forward. I don't see it getting better. I don't expect any change there.

Cris deRitis:                       Yeah.

Mark Zandi:                      Do you?

Cris deRitis:                       Well, no, if anything [crosstalk 00:25:25].

Mark Zandi:                      If anything it's going to be higher taxes on high income holds, because that's where the money is and if you've got a fiscal problem, I guess.

Cris deRitis:                       Well, it's how you read the political tea leaves then.

Mark Zandi:                      Yeah. That's a good point though. Yeah. Because certainly the Trump tax cuts exacerbated the income and wealth distribution problems.

Cris deRitis:                       And earned income tax credits and child tax credits work in the other direction.

Mark Zandi:                      They work in the other direction. Yeah. Yeah.

Emily Mandel:                  Okay. So now that we have some stuff to worry about now, this one's coming from Tim Daley. And he wants to know what is your favorite or least favorite metric to forecast and why?

Mark Zandi:                      Ooh, that's a great question. And Tim, he used be head of sales for our economics unit in the Americas. He's gone on to bigger things, but Tim is a really wonderful sales, marketing, strategic thinker. And we definitely miss him. He's now in the banking unit, I believe, of Moody's, helping out with sales and marketing. So that's a great question. What do you think? I got one in mind.

Emily Mandel:                  Cris, before you answer this, he has explicitly excluded housing starts.

Mark Zandi:                      Oh he did?

Emily Mandel:                  Yeah.

Ryan Sweet:                      I like forecasting housing starts.

Mark Zandi:                      Actually, Ryan's good at forecasting everything though. Yeah. Pretty much everything.

Cris deRitis:                       He's a star.

Ryan Sweet:                      So what's yours, Mark?

Mark Zandi:                      Should I mention two things or one thing?

Ryan Sweet:                      Yeah.

Mark Zandi:                      Two things. First thing is home ownership rate. Good luck with that. It's impossible. And you would think, oh how hard could it be to model the home ownership rate. I defy you to model the home ownership rate. Very, very difficult. We were just talking about this the other day. And because you would think it's a function of demographics, function of affordability and it must be in policy to some degree, but actually estimating econometrically an equation that fits the home ownership rate data incredibly... Well again, that's a challenge. If someone figured that out. And the second is the Manheim Used Car Index. That is painful. Although I think Brisson, Mike Brisson, our colleague who does his own used car pricing indices and forecasts probably has done a much better job than I have. But I've had a very hard time modeling those two things. Those are my two difficult ones. What about you guys?

Cris deRitis:                       I'd say the stock market.

Mark Zandi:                      Oh.

Emily Mandel:                  Yeah. Of course.

Cris deRitis:                       Instantly. Meet someone new. "What do you do?" "Oh, I'm an economist." "Oh what's the stock market going to do? Can I get some investment advice?"

Mark Zandi:                      Yeah.

Cris deRitis:                       So it's always out there, but I don't have any more insight than you do. And then related to your home ownership, anything policy related. Because it's really a political calculation at that point. So trying to understand what's actually going to pass or not pass or how it's going to flow in. There's no econometric framework up there. It's a bit more just guesswork or trying to understand, read those political tea leaves.

Mark Zandi:                      Hey Ryan, you forecast near term a lot of different economic [inaudible 00:29:00] and you do a great job at it. You're very accurate at it. And by the way, are you still following the ranking in terms of accuracy around the monthly series? And how you doing this year, so far?

Ryan Sweet:                      Number two.

Mark Zandi:                      Who's that guy who is number one.

Ryan Sweet:                      Jim Sullivan.

Mark Zandi:                      Is he still number one?

Ryan Sweet:                      No, he dropped. He changed jobs.

Mark Zandi:                      Oh, he's not doing it anymore.

Ryan Sweet:                      No, I think he's doing it, but the way Bloomberg does the ranking is that you have to be in it for a consistent amount of time.

Mark Zandi:                      Oh. So who's number one right now, then?

Ryan Sweet:                      I don't know. I got to check.

Mark Zandi:                      Okay. All right. Whoever it is probably taking your forecast. That's a joke by the way.

Ryan Sweet:                      Yeah.

Mark Zandi:                      No, yeah. That's a joke. I've just made that up. But of all the near term forecasts that you produce, which one or two is the most difficult to get right? And right means, let's say employment is coming out for the month of April and early May you come up with a forecast for that number and then right means that you're you get close to the employment estimate or the unemployment rate or whatever it is you're forecasting. Which variable or variables was particularly hard?

Ryan Sweet:                      Well, it's definitely changed since the pandemic. So pre-pandemic, I would never have said this one because we were actually pretty good at doing it. But since the pandemic, monthly changes in non-farm employment have been very difficult.

Mark Zandi:                      Very difficult. Yeah.

Ryan Sweet:                      Yeah. Because there's issues, there's changes to seasonal adjustment processes. It's a lot of moving parts because the models that we have are built to forecast employment based on demand. Whereas supply is a key part of the strength of monthly job growth now. And we don't have a lot of good high frequency data on that. So it makes it very, very difficult.

Mark Zandi:                      Yeah. That makes sense.

Cris deRitis:                       Are you annoyed by the revisions? I think if we look back, your forecast are actually more accurate if we actually compare them to the revised, but no one ever does that. It's always-

Ryan Sweet:                      No you're right. Accuracy is based on the first, and then when the second, third prints come out, you're going to get closer and closer, you're like, "I knew." Because it's interesting. Every forecast is a learning experience, but sometimes you're just like that number just can't be right. And then you get revised, closer to-

Mark Zandi:                      It gets revised away. Yeah. Well this last set of revisions to the employment data were pretty bizarre, I thought. Because it felt like the employment gains were somewhat consistent or even reasonably consistent with the waves of the pandemic when the pandemic-

Cris deRitis:                       Originally. Yeah.

Mark Zandi:                      Yeah. Before the revision. And then we get this big comprehensive revision and it revises away all of that. And now it looks like the labor market's nothing but a machine, producing-

Ryan Sweet:                      Yeah. You get a forecast over ruler.

Mark Zandi:                      Yeah. Which doesn't make any sense. Do you think it's just seasonal adjustment? They're just smoothing out everything?

Ryan Sweet:                      I guess. I don't know.

Mark Zandi:                      You don't know?

Ryan Sweet:                      It's bizarre.

Mark Zandi:                      We'll find out, I guess. Well who knows? Yeah. Anyway.

Emily Mandel:                  Okay. This next one should be a question all of you should be able to answer more easily. Personal question, what was everyone's first job.

Mark Zandi:                      I was a caddy. You know what caddy is?

Emily Mandel:                  Golf course?

Mark Zandi:                      I'm not kidding. I'm not kidding. Well, you're not counting the lemonade stand when you were in third grade.

Emily Mandel:                  I think we can leave that one out.

Mark Zandi:                      Okay. We can leave that one out. Okay. I wasn't very good at selling lemonade. I got a great story though. No, I won't tell it though. I won't tell it. About my lemonade. You want to hear my lemonade story? No.

Emily Mandel:                  No.

Mark Zandi:                      Probably not. I've got a good one though.

Cris deRitis:                       You're just dying to. Go ahead.

Mark Zandi:                      I want to elaborate. I'll let you guys go first. So I'll come back to my caddying. No, anyway, go ahead. You go [crosstalk 00:33:01].

Ryan Sweet:                      It's a hard job.

Mark Zandi:                      Caddying is hard.

Ryan Sweet:                      It's very hard.

Mark Zandi:                      Pays well though. At least in my day. So what was your first job, Cris?

Cris deRitis:                       I was mowing lawns.

Mark Zandi:                      Ah, yep. That's a good one. Did you have your own lawn mowing business?

Cris deRitis:                       I would hardly call it a business, but yeah. In the neighborhood? Yeah.

Mark Zandi:                      Did you pay your taxes? Oh my gosh.

Cris deRitis:                       I'm almost certain I did. My father was a stickler for that.

Mark Zandi:                      Oh, was he? Oh, okay. Okay. Where'd you grow up, Cris? Where-

Cris deRitis:                       I grew up in Michigan. Little town called Jackson.

Mark Zandi:                      Where's Jackson?

Cris deRitis:                       It's south central.

Mark Zandi:                      It's near Ann Arbor?

Cris deRitis:                       Yeah. About an hour west of Ann Arbor. South of Lansing. Yeah.

Mark Zandi:                      You don't have any Midwest accent whatsoever. Emily, does he have an accent?

Emily Mandel:                  I don't think so. No.

Cris deRitis:                       I've been on the East Coast longer than in the Midwest.

Mark Zandi:                      Oh I see. Okay. Good. Well, lots of lawns to cut in Jackson.

Cris deRitis:                       For sure. For sure.

Mark Zandi:                      Ryan, what was your first job?

Ryan Sweet:                      It was a busboy at a high end restaurant.

Mark Zandi:                      Ah.

Cris deRitis:                       Ah.

Mark Zandi:                      Do you remember what you got paid?

Ryan Sweet:                      No, at the time it was like $2 an hour, but you get tips. And you had to claim the tips.

Mark Zandi:                      As a busboy, you get tips too. I didn't realize that.

Ryan Sweet:                       Yeah. At the end, the waitresses and waiters tip you up.

Mark Zandi:                      I see. Yeah. Oh yeah. So I was a caddy and I had this golf course, Gulph Mills Golf Course. And I had to walk to it from my home. And it was about a mile walk downhill, uphill, that kind of thing. And it was really hard, particularly in the dead of summer. And I remember this one couple, the Dimsdales. I'm not lying. That's their name. The Dimsdales. The Dimsdales would come, husband and wife. And I don't know how old I was, say 15 or 16. And they looked ancient to me. They might have been 35, 40 for all I know, but they looked ancient. And they came to the golf course every day. Did I tell you this story? Did I ever tell you this story, Brian or Cris?

Ryan Sweet:                      Oh yeah. I think you told Cris and I the story once.

Cris deRitis:                       Yeah, we-

Mark Zandi:                      Oh yeah. Well, I'll tell the rest of the podcast. The Dimsdales went there to exercise. That was their exercise. So they would have one bag and they would literally run. They hit the ball and they would run. And me, the caddy had to run with the bag and go to each of them, "Here, Mrs. Dimsdale. Here, Mr. Dimsdale." It's not like they hit the ball in the same place. Right? These are two guys hitting all over the place. So this is on an 85, 90 degree day at the 18th hole. And the 18th hole, Gulph Mill is a straight up hill because the clubhouse is the top of the hill. I go to Mrs. Dimsdale, before she tees off I go, "Mrs. Dimsdale, can we just take one minute break before you run up this hill?" And she got very nervous and called up to the caddy shack and said, "The caddy is fainting. He's going to faint." So they rushed down all these people that helped me out. That was highly embarrassing. But anyway, that was the first job.

Cris deRitis:                       How much did you get paid?

Mark Zandi:                      I got 12 bucks. Six bucks a bag. Yeah. And then by the time I left, I think it was 18 bucks a bag. That's not bad actually. Of course, now I think about it-

Ryan Sweet:                      When you adjust it for per hour.

Mark Zandi:                      [crosstalk 00:36:49] everyone liked the Dimsdales. It was an hour and a half for 18 holes as opposed to four hours. Because you could [inaudible 00:36:55].

Emily Mandel:                  The mark up for that though.

Mark Zandi:                      Yeah, exactly.

Emily Mandel:                  I've got a few more softball questions.

Mark Zandi:                      Aren't you having fun, Emily? You see the way she said that?

Emily Mandel:                  I can keep going through the whole day.

Mark Zandi:                      Oh, we're almost at the end of the hour. So okay.

Emily Mandel:                  I've got another 20 of these, so however long you want to stick around. I'm going to pick and choose.

Mark Zandi:                      Is that an overhanded softball or an underhanded softball?

Ryan Sweet:                      Oh yeah, and the first one.

Emily Mandel:                  Okay. So if you have a flight schedule to take off at 2:00.

Mark Zandi:                      That's an inside joke, but I wasn't inside that.

Emily Mandel:                  [crosstalk 00:37:25].

Mark Zandi:                      Emily. I just right over your head. I know. But [crosstalk 00:37:29].

Ryan Sweet:                      You didn't listen to the first few podcasts.

Mark Zandi:                      First [inaudible 00:37:31] podcasts.

Emily Mandel:                  I didn't. I've tuned in more to the more recent ones. I went to a conference couple years back.

Mark Zandi:                      What's your favorite podcast, Emily? What was your favorite podcast?

Emily Mandel:                  Oh, I like the politics ones.

Mark Zandi:                      Oh you like the politics? Oh yeah.

Emily Mandel:                  About politics and things. Yeah.

Mark Zandi:                      Yeah. They're good.

Emily Mandel:                  Okay. Question. Sorry for missing the softball joke here, but I'll do better.

Mark Zandi:                      No, no, no. Don't worry about it. It's a bad joke.

Emily Mandel:                  If you have a flight scheduled to take off at 2:00, what time are you getting to the airport? Are you one hour in advance? Three hours in advance, personally?

Ryan Sweet:                      Are we all assuming Philadelphia International?

Emily Mandel:                  Yeah. Let's go with Philly. Easy.

Mark Zandi:                      Yeah I think we should.

Ryan Sweet:                      Okay. All right. Just making sure.

Mark Zandi:                      That's good. That's good. That's a good question. Okay. So what's the answer?

Ryan Sweet:                      So the flight takes off at two.

Mark Zandi:                      Yeah.

Ryan Sweet:                      Okay. All right. I'm going to be the outlier here.

Mark Zandi:                      Really? What are you?

Ryan Sweet:                      You're 45 minutes before the flight takes off?

Mark Zandi:                       No, no, no, no, no, no, no.

Ryan Sweet:                      I would be at the airport, through security by 11:00 AM.

Mark Zandi:                      Oh well that's a little early.

Emily Mandel:                  Wow. That's early.

Ryan Sweet:                      No, I can't do the stress.

Mark Zandi:                      You can't take it?

Ryan Sweet:                      No.

Mark Zandi:                      Yeah.

Ryan Sweet:                      I'd rather get there and start the computer and do work, but know that I'm there.

Cris deRitis:                       Now do you have the precheck?

Ryan Sweet:                      I do have the precheck.

Cris deRitis:                       Oh. Wow.

Ryan Sweet:                      Still.

Cris deRitis:                       Okay.

Mark Zandi:                      Do you have a club membership?

Ryan Sweet:                      I have the American Express.

Mark Zandi:                      So do you go into the AMEX? Where is the AMEX club in Philly? Do you have one in Philly?

Ryan Sweet:                      Yeah. If you go right by the international gate, yeah. It's the first door.

Mark Zandi:                      Oh, that's right. I know where that is.

Ryan Sweet:                      Right there.

Mark Zandi:                      Yeah. Yeah. Between A west and A east.

Ryan Sweet:                      Yeah. Correct.

Mark Zandi:                      Yeah.

Cris deRitis:                       Wow. You guys are high [crosstalk 00:39:11].

Mark Zandi:                      Right next to the British Airways.

Ryan Sweet:                      Exactly. Yeah.

Mark Zandi:                      I can tell you the kiosk next [inaudible 00:39:20]. So Cris, that's a great question actually. How would you [crosstalk 00:39:24].

Cris deRitis:                       I leave my house two hours before take off. It's an hour to get to the airport. Now I'm an hour there.

Ryan Sweet:                      Oh no.

Cris deRitis:                       At a time. Enough time to pass by, get the coffee and go to the gate.

Mark Zandi:                      The Shishi coffee.

Cris deRitis:                       Yes. Yes. In that case.

Mark Zandi:                      That case is the Shishi coffee.

Cris deRitis:                       Definitely.

Ryan Sweet:                      You do realize Philadelphia internationals off 95 and that could take 45 minutes to go 0.2 miles. You're cutting it close there, Cris.

Mark Zandi:                      Have you ever missed a plane, Cris?

Cris deRitis:                       I've not missed a plane yet.

Ryan Sweet:                      [inaudible 00:39:58].

Cris deRitis:                       There are a lot of options. You don't have to stick with 95.

Mark Zandi:                      Well, for me, I prefer getting there as early as possible. I'd go there at 9:00 AM if I could, because I see no difference between I have the American Airlines Club. And they've got really good ones. They're really good. They got your, not Wawa coffee, but they got reasonably good coffee. They got a banana.

Ryan Sweet:                      Do they have WiFi?

Mark Zandi:                      WiFi's great. Yeah. And nice view. They got a nice view with the big windows. And so why not hang out there well in advance if you can and not worry about a thing? So I'm all for that. And that's a beautiful thing about remote work. You can work anywhere. And actually, I like going to the airport now because I'm tired of working in my bedroom. So I can hang out in the, I call it US Air, used to be US Air America Club, American Airlines club. So I'll go early. I'll go as early as I possibly can. Yeah. The only problem is they get a little annoyed if you're Zooming. That's a little bit of an issue. They need to work on that.

Ryan Sweet:                      [crosstalk 00:41:18] private rooms?

Mark Zandi:                      Well actually they closed down the private rooms in the pandemic. They haven't opened them up. At least not the last time I asked.

Cris deRitis:                       You have headphones on or can everyone hear at all times?

Mark Zandi:                      I have my headphones on, but you're talking.

Cris deRitis:                       Yeah, yeah.

Mark Zandi:                      Yeah. So they get annoyed at you. And I go into the corner over here and they still hear me somehow. I don't know how that happens, but yeah. But that's the only issue. Emily, on this podcast, we think deeply about all these questions. You can see how deep we go.

Emily Mandel:                  I am connecting it to broader economic [crosstalk 00:41:53] work.

Mark Zandi:                      Yeah. You see how we did that?

Emily Mandel:                  That's good. Okay. Another couple-

Mark Zandi:                      You got another couple. Okay. Oh, you can fire away.

Emily Mandel:                  Or we can jump off to you.

Mark Zandi:                      No, no, no, no.

Cris deRitis:                       You can go for it.

Mark Zandi:                      Let's do a quick fire.

Cris deRitis:                       Two more.

Emily Mandel:                  Two more.

Mark Zandi:                      I'm tired.

Emily Mandel:                  Okay. This one is courtesy of Dan White.

Mark Zandi:                      Oh no.

Emily Mandel:                  And she would like to know which Zandi brother would win in an arm wrestling match.

Mark Zandi:                      Carl hands down.

Emily Mandel:                  Carl. Okay. Despite the [crosstalk 00:42:26] gym or whatever he does.

Mark Zandi:                      Oh God, he's vicious. Carl's vicious. Carl's vicious. Yeah, he's vicious. He goes for the jugular. Yeah. Are you kidding me? He won't even get let us have budget for a cowbell, Emily. Are you kidding me? That guy's ruthless. He's ruthless. Yeah. No he's actually in great shape. He's an excellent athlete. He played college soccer and he was really, really good. And now he has his own gym in his basement. It's a professional gym. Yeah. He showed it to me the other day. It's everything you'd ever want in a gym. Except he doesn't play Guns N' Roses there. That's the only problem.

Cris deRitis:                       And you're not allowed.

Emily Mandel:                  You need to fix that.

Mark Zandi:                      And I'm not allowed.

Cris deRitis:                       You're not allowed in.

Mark Zandi:                      I'm not allowed in. But are you kidding? Carl would win that hands down.

Cris deRitis:                       Yeah.

Mark Zandi:                      Actually other brother would beep the both of us though. Not Peter, Richard.

Emily Mandel:                  I don't even know you had another.

Mark Zandi:                      Oh yeah, we got many Zandis. We got many Zandis.

Emily Mandel:                  I think I've learned something new here. Okay. Another quick one. Hopefully quick. Who knows with you guys. Where is your favorite place to grab lunch in Westchester?

Mark Zandi:                      Oh, that's just a bad question.

Emily Mandel:                  There's a lot of options, but if we're trying to get people to come back to the office, then maybe this will remind them of all the good times they used to have in these places.

Mark Zandi:                      Do you guys have favorites? Cris has a favorite for everything.

Cris deRitis:                       I rarely have lunch.

Mark Zandi:                      You don't have lunch?

Cris deRitis:                       I go to the gym.

Mark Zandi:                      Oh, you go to The Y?

Cris deRitis:                       Go to The Y. Yeah.

Mark Zandi:                      See, everything he does is the Shishi. Shishi Y. Shishi Wawa. Shishi Y.

Emily Mandel:                  Why? Stop that.

Mark Zandi:                      Well, have you seen The Y in Westchester? It's pretty Shishi.

Cris deRitis:                       On Airport Road?

Mark Zandi:                      No, no.

Emily Mandel:                  The one at the office probably.

Mark Zandi:                      Is it the one caddy corner to our office?

Ryan Sweet:                      No, not that one. That one's okay.

Mark Zandi:                      That one's okay?

Ryan Sweet:                      The one on Airport Road is legit. It's got a children playroom.

Mark Zandi:                      Yeah. What playroom?

Ryan Sweet:                      No, I see Cris there every once in a while.

Mark Zandi:                      Oh, you belong to that gym too?

Ryan Sweet:                      Yeah. You can drop the kids off.

Mark Zandi:                      That's Y. [crosstalk 00:44:31].

Ryan Sweet:                      And you take him to the pool, the other two?

Mark Zandi:                      What about you Ryan? You have a favorite?

Ryan Sweet:                      It used to be Three Little Pigs, a little sandwich shop right down the street from us. But they closed down. Yeah. What about you Mark?

Mark Zandi:                      I don't go out for lunch.

Emily Mandel:                  You guys just don't eat. Okay. We'll skip that one. I guess that's an answer in itself.

Mark Zandi:                      I have gone out to lunch, but [crosstalk 00:44:56] I'm really bad person to answer that question. Yeah.

Emily Mandel:                  Okay. So then I'll end this with an easy one. When is the date of the next recession?

Mark Zandi:                      Ooh. That is a good question. That lunch question was a bad question. This a good question. This is a really good question. Do you want the day?

Emily Mandel:                  Yeah. Give us the day.

Mark Zandi:                      You want the day? Oh. Ooh, this is interesting. Oh, okay. Just to preface this, Ryan is on the record, in our last podcast, 75% probability of recession within the next, what was it? 18 months?

Ryan Sweet:                      12 to 18 months.

Mark Zandi:                      12 to 18. Cris was at 55%. And I think I was at 40%, wasn't I? For the next 12 to 18 months. I'm one third over the next 12 months, 40%. So I don't have a recession in the next 18 months. You guys do. So great question. When do you think it's going to happen? Start. I like this question. That makes it tough, huh?

Cris deRitis:                       If it happens.

Mark Zandi:                      Well you said 55%.

Cris deRitis:                       Yeah.

Mark Zandi:                      Yeah.

Cris deRitis:                       Still not guaranteed. I'm going to go with Saturday, September 23rd.

Mark Zandi:                      Are you going to give us a year?

Cris deRitis:                       2023.

Mark Zandi:                      Oh, wait, this year? You think this year?

Cris deRitis:                       No, no. Next year.

Mark Zandi:                      Oh, you said '23. I thought you said 2022.

Ryan Sweet:                      I am so puzzled by this. Because is the NBR going to make an announcement on a Saturday that we entered a recession?

Mark Zandi:                      Oh no. This goes beyond that.

Ryan Sweet:                      We provide more value than the NDR.

Mark Zandi:                      They'd say September 2023. As Cris is really crafty, he picks 18 months from now. Exactly 18 months from now. [crosstalk 00:46:56] Yes it is. Yeah. Yeah. That's exact last month for you to be right, but pretty crafty.

Cris deRitis:                       Yep.

Mark Zandi:                      Why the 23rd?

Cris deRitis:                       Oh, that's the equinox.

Mark Zandi:                      Equinox?

Cris deRitis:                       Yep.

Mark Zandi:                      Yeah. Is it the 23rd?

Cris deRitis:                       I do like the Zodiac economics from time to time.

Mark Zandi:                      Okay. Okay. That's fair enough. The economics astrology.

Cris deRitis:                       Astrology. Thank you. Yeah that's-

Mark Zandi:                      Yeah. Got it. I've been there. I've done that. Makes a lot of sense to me. Ryan, what do you think?

Ryan Sweet:                      I think there's a full moon too.

Mark Zandi:                      Yeah, all right. Yeah.

Emily Mandel:                  New section on the website.

Mark Zandi:                      Emily, what do you say? What do you think? When's the next recession? Do you have a view? Every economist should have a view on this, I think. Well, what do think [crosstalk 00:47:48].

Cris deRitis:                       I think she's optimistic. I think she's an optimist.

Emily Mandel:                  I'm actually fairly pessimistic on this.

Cris deRitis:                       Oh.

Emily Mandel:                  Actually I think people are going to get stressed pretty soon and I don't know. Everything's heating up just so incredibly quickly.

Ryan Sweet:                      So what are your odds? What are-

Emily Mandel:                  In the next 12 to 18 months, we're going with that long. So Ryan's at 75%. I'm sticking with two thirds, maybe.

Mark Zandi:                      Okay. Two thirds. Okay.

Emily Mandel:                  Yeah.

Mark Zandi:                      Yeah. That's a good one. Okay. Ryan, what's your day?

Ryan Sweet:                      July 7th, 2023.

Mark Zandi:                      July 7th, 2023.

Emily Mandel:                  So even earlier than Cris'.

Ryan Sweet:                      At 7:00 PM, eastern time.

Mark Zandi:                      7:00 PM, eastern time. Any particular reason? Why 7:00 PM.

Emily Mandel:                  What could happen at 7:00 PM to even trigger this also?

Ryan Sweet:                      Yeah.

Mark Zandi:                      That's interesting. Huh?

Emily Mandel:                  Okay.

Ryan Sweet:                      Just thinking about the catalyst. Thinking about the catalyst.

Cris deRitis:                       Is there a meeting?

Ryan Sweet:                      No. You can get an emergency fed rate cut.

Mark Zandi:                      Oh.

Ryan Sweet:                      That starts everything.

Mark Zandi:                      What was I going to say? Oh, before the pandemic, you will recall I had a recession date. And everyone was laughing at me. I said, June of 2020. Well before June of 2020. Emily knows this.

Emily Mandel:                  I remember this.

Mark Zandi:                      2018, '19. And you guys were mocking me. And I was off by four months maybe.

Ryan Sweet:                      Yeah. We've talked about this. There's a big asterisk that goes next to it.

Mark Zandi:                      What's the asterisk?

Ryan Sweet:                      A pandemic. You did not predict a pandemic.

Mark Zandi:                      Well, I did not, but it wasn't the pandemic. You don't know the counterfactual. It could have been something else.

Ryan Sweet:                      I do know the counterfactual. There would've been no recession.

Mark Zandi:                      I don't know.

Ryan Sweet:                      I'll never forget. I was in the hospital. Katie had just given birth to Reagan. And this is when the cases in Seattle started developing.

Mark Zandi:                      Oh yeah.

Ryan Sweet:                      I turned to the nurse, and I was like, "How bad do you think this is going to get in the US?" And she's like, "Why?" I was like, "Because healthcare wise, I'm really concerned. But also Zandi can't be right about a recession. If this really intensifies, we're going to get a recession."

Cris deRitis:                       Wow.

Mark Zandi:                      Well you do recall one of reasons, and of course I was tongue in cheek, obviously. But the yield curve had inverted. And of course the economy was struggling with the trade war with China. President Trump had put tariffs on China and we were in a pitch battle. And manufacturing was clearly in recession. It was contracting. Agriculture was clearly contracting. So the economy was soft and weak. And so anything that came along and of course I didn't obviously predict the pandemic, but I did think the economy was vulnerable to anything else that could come along.

                                             But I think in terms of future recession, I do concur that the next 12 to 18 months are pivotal. That's going to be tricky to navigate through, for the fed to raise interest rates enough, fast enough to help quell the inflation and get inflation expectations down, but not raise rates so far so fast that it undermines the economic recovery. And that process, that normalization of policy is going to happen in the next 12 months, 18 months. And to get that right is hard. So I would say that the probabilities of recession in that 12 to 18 months, and I'm saying 40% over the 18 month period, that is very high and uncomfortably high. And I wouldn't argue with you if you said we're going to have a recession in that period. It's very possible.

Ryan Sweet:                      How would you and Cris' odds change if on Monday we come into the office and Europe has put a full oil embargo on Russia?

Mark Zandi:                      [crosstalk 00:52:03]. That's a recession. Because oil prices will jump.

Ryan Sweet:                      I agree.

Mark Zandi:                      Ad that's not our baseline. That's not what I'm assuming. But if that happened and once oil prices jump here from where we are now and how fragile things are, we're done. We're going in. Yeah. So I'd say, yeah, that'd be catalyst. But I don't expect that. And that's not the most likely scenario because it would push us in the recession. And I think the Europeans would know that. And I think they certainly don't want it to push the economy into recession because once you do that, I think you potentially undermine the support from the population for putting pressure on Russia to do the right thing. And you certainly don't want to do that. It's very counterproductive. So I'm guessing they won't do that. But I do think if we get through the next 12, 18 months, I think we will have a period where recession risks are pretty low, because the fundamentals of the economy are pretty good. So we could go on for a while before we get to the next recession. It's not-

Ryan Sweet:                      If we survive the next 18 months

Mark Zandi:                      Yeah. If we survive the next 18 months. Yeah. That's what I'm saying. So I'm going to answer, I don't know. Emily, I don't know. I don't have a recession date. I'm very careful as you can tell about picking recession dates. I only give you a recession date when I'm confident that I can give you the recession date. These guys, I don't know. They're-

Cris deRitis:                       Two thirds probability. Yeah.

Mark Zandi:                      Yeah. They're two thirds probability. Yeah. Anyway. Very good. That was great. The great questioning. I appreciate it. I don't know about you guys.

Ryan Sweet:                      That was great.

Mark Zandi:                      But that was great. Yeah

Emily Mandel:                  Well, this was fun.

Ryan Sweet:                      You did a nice job, Emily.

Mark Zandi:                      Very good.

Ryan Sweet:                      Thanks.

Mark Zandi:                      Anything else you'd like to say? What do you think? Do you know us any better after this?

Emily Mandel:                  Yeah, I know that-

Mark Zandi:                      Do you like us more or less as result of all this?

Emily Mandel:                  I'm concerned about the hanging out in the airports part of things. But otherwise better. Yeah.

Cris deRitis:                       What's up with that? I don't know.

Mark Zandi:                      I never thought about that way.

Emily Mandel:                  [crosstalk 00:53:57] life choice.

Mark Zandi:                      Yeah. I never really thought of it that way.

Ryan Sweet:                      I'm with you, Mark. I'd be in the airport right away.

Mark Zandi:                      Very good. All righty. Well, I guess I am supposed to call this a podcast. And of course no podcast ends without @markzandi. @markzandi. I'm just saying. And Ryan, what's your Twitter?

Ryan Sweet:                      @realtime_econ

Mark Zandi:                      And Cris is he's not active on... is there a handle or something in LinkedIn? Some identifiers?

Cris deRitis:                       Just look up my name.

Mark Zandi:                      Just look up his name. Okay.

Cris deRitis:                       Very easy. Very good. Emily, do you have a Twitter?

Emily Mandel:                  I do, but I'm just a lurker.

Cris deRitis:                       Okay. A lurker?

Ryan Sweet:                      A lurker?

Mark Zandi:                      Do you follow Ryan?

Emily Mandel:                  I don't think I follow Ryan. I follow you, Mark.

Mark Zandi:                      What is going on? What is going on?

Emily Mandel:                  I will.

Ryan Sweet:                      I'm new to this. I'm new to this game.

Mark Zandi:                      What about me? Do you follow me?

Emily Mandel:                  I do actually.

Mark Zandi:                      Okay. Okay. That's good.

Emily Mandel:                  [crosstalk 00:54:55] big enough.

Cris deRitis:                       Good answer. Answer.

Mark Zandi:                      Very good. Okay. We'll call this a podcast. Very well done and really appreciate the opportunity to chat with everyone's. So thank you.