Food Inflation Set To Surge: Economist Warns How Bad It Could Get | Michael Madowitz
Summary
Oil Shock: Extensive discussion on crude oil disruptions from Middle East conflict, highlighting historical links between oil shocks and recessions and why higher U.S. production doesn’t insulate consumers.
Diesel Crisis: Diesel prices spiking near $5/gal drive trucking, farming, and logistics costs higher, creating delayed pass-through inflation beyond the immediate hit at the pump.
Natural Gas vs. Oil: U.S. natural gas prices remain relatively stable while oil surges; LNG liquefaction facility impacts and pipeline constraints expose Europe’s vulnerability.
Food Inflation: Food prices expected to rise as higher diesel and input costs (including fertilizers tied to natural gas) feed through with uncertain timing and magnitude.
Labor Market & Fed: Cooling labor data and higher-for-longer rates frame a “yellow light” economy; Fed independence and deficit dynamics are key to inflation management.
AI Labor Impact: Despite headlines, the guest sees limited current evidence of mass AI-driven job losses, though AI-exposed sectors show softer recent graduate hiring after prior binges.
Energy Security: The notion of U.S. energy independence is challenged by globally priced oil; policy focus may shift as governments weigh supply-demand tools and midstream resilience.
Transportation Costs: Refining and product-market stresses (diesel, jet fuel) threaten logistics and airfare inflation, with trucking particularly sensitive to diesel spikes.
Transcript
The US war in Iran has caused major disruptions globally uh when it comes to oil, crude oil, but now we're also seeing a diesel crisis. And so the question on everybody's minds is will prices of everything go up, not just gas at the pump. How will our lives be impacted? What needs to be done uh to alleviate stress on Americans? Uh Michael Madawitz is here with us. He's a principal economist at the Roosevelt Institute. Welcome to the show, Michael. Good to host you today. Welcome. >> Lovely to be here. Sort of. I want to get sort of. Are you are you disappointed with the state of the world? Are you disappointed with just the war? Are you disappointed with the house uh cost of living? You know, what what what ails you, Michael. Let's start with that. That's actually a nice bigger picture question. Well, I mean this this is actually a good question because you know obviously as an economist like we're always just the rosiest people at the party but you know like I think if we if we didn't have a war right now like we would be talking about a lot of other economic data that is not you know the smoothest sailing in the world. um you know like the basically every I was quite surprised everything we saw this month whether it was jobs data, GDP data or inflation data like there were either large downward revisions or things came in a little bit worse than we were expecting. So you know we could be having like a a moderate doom version of where things are right now even if we weren't you know dealing with all of this as they say. the last payroll numbers came out um and the economy lost 92,000 jobs and the unemployment rate ticked up to 0.1%. But we know payroll numbers are quite noisy. How are you interpreting the trend broadly speaking? >> Yeah, I think it's like we are way too early to say the labor market was pointing to a recession and I think there's been a lot of desire to say that for roughly a year, maybe a little bit longer even. Uh, I think it's really safe to say the labor market has been cooling for a while. We watch the labor market really closely in the US because it is our most reliable monthly indicator, you know, that gives us real-time data that we can trust with some very mild revisions usually. Um, it is not saying this economy is like a code red. It is this economy is is like kind of a yellow light. Uh but that said, like we're at a point where, you know, if you're looking at labor market data or uh consumer inflation data, you're not seeing the numbers you want to see. You're seeing really like flatline growth stuff, you're seeing moderate creeps up in inflation. And then, you know, if you step outside that box and look a little bit wider, look at things like producer prices, uh and and I'm not talking about oil yet, but we'll get there. uh you know th those you're actually starting to see like a lot more pressure that is a little bit worrisome going forward but you know this is not the numbers would be worried about where we're saying oh these these scream recession it's more like these are the numbers that are you know I don't know you're halfway through a marathon and you're feeling really short of breath >> I turn on the radio doesn't matter what news station and then half the time people are talking about losing jobs to AI that just seems to be the every single day. If you look at the labor data, have you actually seen any evidence from what the numbers have suggested that jobs have been lost on mass to AI? I'm not I'm not talking about Jack Dorsey cutting off half his workforce from block because of AI. I'm not talking about isolated niche tech industries or subindustry. I'm talking about the broader economy. Are we at risk of losing our jobs to AI? >> Uh I mean not not yet. Like we'll see what he can come up with. >> Okay. Uh I think the real thing here is there are a lot of different segments of the economy and we think of you know things get hit by different shocks differently. If you asked me what was going to happen with trade in 1990 I probably would have told you that you know on average most Americans would see their real incomes go up. And I would have been right, but you would have absolutely no idea that was true uh like in the aggregate numbers now where you know the vibes are that this was just terrible for everybody or I mean much more specifically in the impacted communities where lots of negative effects hit. So there's the possibility this could be really bad. If we're looking at what's going on right now, attribution is really hard. This is a little bit like climate science in some way. Like is this heat wave because of global warming? like I don't know it could just be a heat wave. Um but what we have seen a lot of in the last uh I would say I believe it's the last two graduating classes at least in the US where I've looked at the data closely uh you've seen the industries that you would expect to be impacted by AI not doing a bunch of hiring of recent graduates. Now this is complicated because those are also the industries that just went on a hiring binge in the two years before. So if you're Jack Dorsey, you are definitely going to tell people that like my wildly profitable company that may or may not show profits yet is going to get a lot more profitable because of AI. And you know, the reason we're not seeing profits right now has nothing to do with the fact that I overhired in 22. But I think there, you know, if you're looking for a signal in real data right now, hearing announcements about AI is like much more of a we're looking to the future. let us know talk talk about what we did in the past. >> Okay. Well, this leads me to uh bring up your article entitled the economy doesn't have the room to absorb this oil shock. Maybe uh tell us why uh without I'll read a few paragraphs later, but just from a high level perspective, explain this title. Why doesn't it have the room to absorb this? >> Yeah. So, I think there's been a I mean, there are a few correctives that are going on here at once. One of these is that we have in the US at least convinced ourselves that producing a bunch more oil which you know is as true as could hum be humanly possible. We are producing way more oil than we have ever or any country has ever. And I think there's this assumption that this is going to insulate us from, you know, oil shocks, which would be amazing because, you know, up to, I believe it's 2010, oil shocks were a major contributor to six of the previous seven recessions. Um, you know, we're going to give 2020 a pass because I'm not sure what you can point to other than a pandemic for that. But, you know, oil shocks are a huge contributor to big recessions. And, you know, the idea that you could get out of this by producing a bunch of oil was I don't know I'm going to call it, you know, canon among American economists, but it it it had a lot of truck. And you know, I think one of the things we need to understand is that >> whether or not we're producing the oil doesn't really matter for consumer spending. >> Like >> you are filling up your car with gas. And you know, I think as we talk more and more about what exactly is breaking right now with the straight up moose closure, uh, you know, it's becoming more and more clear that we have absolutely no idea where the oil that fills our cars up comes from. So whether or not we're freezing war doesn't have much to do with it. And then as we were discussing a minute ago, you know, it's not like you were looking at robust data coming into this. I think if we'd had a shock like that, like if this administration had come in say a year ago and the first thing they did was fire off a bunch of missiles at Iran and and touch this thing off, I think it would be really bad. Uh I think they kind of like blew that on Liberation Day. And you know, to the extent that we have the ability to walk that off, we just don't have that long term anymore. >> Before we continue with the video, let's talk about a company that's building serious gold leverage for the long term. 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Even before oil started spiking uh after the street of hormuz got closed, Michael uh the labor market has already been flatlining. both Christopher Waller uh of the Federal Reserve as well as Jerome Pal this week, they both have said in independent press conferences that the labor market didn't add any jobs net net in 2025. Um if you strip out um some seasonal data changes and also account for revisions, very important revisions. Why do you think the labor market was slowing down or at least stalling all throughout last year? major causes of this lack of growth, this stagnation, shall we say? >> Yeah. I mean, I I think part of the issue you were dealing with to begin with was, you know, if you looked at the economy in January of 24 and said, "Okay, where's the growth going to come from?" There wasn't really a big push from the labor side. It was very much a look, we're about to get inflation under control and then we can relax. Then we did a lot of things that constricted the supply side. We did tariffs uh in various measures kind of on and off throughout the year. Uh but I think more importantly we did just the most disruptive immigration policy the US has done in at least a generation or two. Uh and you know that like when we got our revisions this month like that showed up really big in the data. Uh we have a much older population than we thought we would this time last year. Uh and you know I I begrudge absolutely nobody who's worked 40 years their retirement but fact is when you don't have young people coming in and replacing them uh from the US and from our usual uh immigrant labor force that provides a lot of the growth and labor supply in the US in a lot of the growing industries. You know, this creates downward pressure on total growth, creates upward pressure on inflation, and this is where you hear things like pal saying, oh, like we're at, you know, like our break even job growth number is basically zero. So, you know, like like that's like a very clear supply side pressure. Another trend I want to bring to your attention, the deficit has been widening. Uh it's somewhat corrected uh back towards zero right after CO uh but it's now back down to roughly $1.7 trillion of federal in the red. That's the federal deficit. Um does this have any direct impact on the average American? >> I think it doesn't yet. I mean I think like it's clearly in the background like in a in a secondary sense for Fed policy right now. I think the real issue is that we are very worried about the debt going up at a time that interest rates are not going back to where they were before the crisis. >> And you know, I'm I'm a big believer in uh we never figured out why interest rates fell for 20 years. Uh and so we shouldn't just assume that they're going back to where they were 20 years before that. But as time goes on, you got to be about this, right? Like if interest rates are going up and they seem to be staying up, then it's really important to stabilize your debt payments and you can't do that if you keep growing the debt. >> So, let's bring this back to today. Uh crude oil jumping, but also uh diesel uh gas prices at the pump. We know that diesel prices meanwhile have grown even more sharply. Diesel is just under $5 a gallon according to AAA, $1.34 higher than just a month ago. Um, diesel is important because it's the bedrock of the trucking industry. Uh, presumably if diesel stays high, trucking costs go up. Everything that's being shipped via trucks, food for example, will probably need to go up unless we're seeing some sort of price control. What What's your take on uh on diesel going up in this uh this this issue here? Yeah, I think price controls on diesel would be a not brilliant idea, but you know, who knows where we go at this point. I think that diesel is a really good illustration of why it's important to have a different authority, namely the Federal Reserve looking at inflation than the politicians who are doing most policy. I think that, you know, we have a lot of focus on inflation right now. Sorry. I believe affordability is the uh the term of art right now. But you know, if you're talking to Americans, they are very focused on what it costs to fill up their car. That's gasoline. Cool. We need to get gas prices down. Uh we don't need them to go up what, a dollar in a week or whatever it's been. Uh on the other hand, you know, if you were worried about uh you know, not just Mike today, but Mike in 6 weeks, Mike in 6 weeks, it you know, assuming everything gets resolved on like tomorrow, uh which seems maybe unlikely, but go with me here. If everything gets resolved tomorrow, Mike is thrilled to gas up his car. Uh Mike is bummed because then Mike goes to the grocery store and everything's really expensive because the farmers are filling up their tractors with diesel and they have to pass that on and then they're shipping their goods to market with trucks that run on diesel and that gets passed on. So there's a sort of short-term we're seeing things at the pump immediately and then there's a longer term that's showing up you know maybe like I think if you're a trucker you're very aware of the German diesel crisis but you know you've seen like other grades of fuel diesel shipping fuel uh not gas but jet A which is kerosene right like these grades are going way up and you know I think that's like a like because a lot of that is refined in the Gulf before it gets shipped out. And that's a big concern in the sense that those all pass through to other prices, but they take longer to show up. So, we're a little less on top of >> So, how long how long is this lag before we have uh prices actually show up um from higher fuel prices? Oh man, this is where you make me look stupid because, you know, if you asked me two weeks ago, I would not have possibly believed that crude prices would be where they are right now. Uh because I was looking at quantities and and quantities do not say what you would infer from headline crude prices. And I guess like you're seeing some of this where like the you have big spreads in a lot of localized markets where it's like okay but if you actually want physical bar barrels of oil you have to pay a lot more than the Brent price. But you know so far uh this seems to be more of a quantity story than a price story. And that could eventually even out positively but it could also even out in a really bad way. Food prices have already been climbing throughout 2026 uh from the beginning of the year till now and it's not directly because of diesel going up which was a relatively recent event. This is from the uh USDA food price outlook 2026. Uh the level of food inflation vary depending on whether the food was purchased for consumption at home or away from home. Uh but basically the forecast is in 2026 prices for all food are predicted to increase 3.1% with a prediction interval of 0.7 to 5.7%. Food at home prices are predicted to increase 2.5%. Food away from home prices are predicted to increase 3.7%. I don't want my food bills to go up. I don't think you do either. What's causing this? How do we make it stop? So, I don't know exactly what's going into those numbers because I can't remember when this one came out, but I I mean I think like the important thing here is we were already worried about food prices and >> a lot of I mean we will talk about fertilizer in a second. >> A lot of what's going into food at home prices >> are intermediate inputs and various shocks that have been hitting these for the last two to five years really. Um I I don't quite understand why we never recovered as as fully as we thought we would from the CO shocks, but I mean we really haven't. Uh and and I think that's like a good illustration that we're, you know, we're still expecting 2 and a half% food inflation. That said, like these are these are not the numbers that should be particularly worrying a wealthy country like America. Um I I I will be I mean I'm yes, I'm a red-blooded American. I will like swear up and down every time I like put something in my grocery cart and the price is 50 cents higher than it was last year. But ultimately like we can mostly swing this because food is a really small portion of our expenditures. The problem is you know if you're already looking at 2 and a half% and then you shock the whole economy particularly uh sectors like fertilizer production that are super dependent on natural gas exports in the Gulf. you know, that gets a lot harder to figure out both how large the shock is and and sort of when it's going to happen. And so, you know, a we don't know how big the shock is. B, we don't know when to sound the all clear and say, okay, this leveled out at 2 and 1/2 or 4 and 1/2 or 7 and 1 half%. And I think, you know, people are right to be a little concerned about that. And and I think there's probably an additional layer of having gone through the first real inflation shock that I'm not going to the good news is we're on Zoom. Hopefully it's smoothed out some of my wrinkles. You look flawless. I'm not going to guess at your age. This is like the first really big inflation shock on the upside that I can remember in my lifetime. I'm guessing it is in yours. And you know, I think like everyone is kind of getting their heads around that. >> Uh yeah, I mean CO was probably the first time in my life that I've experienced really really high inflation in a very short amount of time, but CO had the exact opposite effect when it came to gas and I also didn't have a car at the time, so I didn't care personally. Um if gas goes up either way, >> every time your airplane tickets, right? Um less so now. >> Exactly. But generally speaking now, right, how how much further does gas have to go before Americans really start cutting back on discretionary items like plane tickets, like vacations because it's just eating into their pocketbooks. Yeah, this is like another piece where you know the I I think one of the things that I was telling people over the last week is you know you have financial markets data which is very forward-looking and very speculative and then you have real economy data which is very concrete and really well measured and unfortunately is like entirely about what's behind you. Uh I think that we were already seeing pretty high inflation in things like airfares. You know, historically gasoline is not really a thing that Americans are particularly good at throttling back on in the in the short term, right? Like uh if I want my house to be 75°, I do that with a thermostat, which kicks on some piece of equipment I bought 20 years ago. if I want to use less gas, you know, maybe I lift and coast, as they say in the F1 uh genre. But, you know, there's there's just not much you can do there. And so, you know, these these things come down to capital goods. And I think on the plus side, we actually do have a much less oil dependent economy than we did 10 or 20 years ago. But that doesn't mean we're fully insulated. It just means it hits us less aggressively and maybe you know I I think there there is a perception as well because if you look at the efficiency of the cars that we drive that's gone up a ton. If you look at the efficiency of the trucks that are shipping the food around the country you know that hasn't changed a whole lot at all. >> So this leads me to wonder if globalization is coming to an end. Uh if I'm sitting here as a world leader thinking about how to hedge against this kind of crisis or disruption in the future, maybe my advisors may be asking me trade less, be more self-sufficient on fertilizers, for example, which I was just showing an article of Tennessee farmer now has to pay an additional $100,000 more for fertilizer this season, according to an article from Fortune. Anyway, the point is things are going up in price. Disruptions are happening across many industries, not just oil. And perhaps countries will trade less with each other and become more protectionist in the future. Is that the path in which we're headed, Michael? >> Uh I mean I I don't know this that's like a solution to this problem, but that I mean, you know, if if you asked me about public support for that a month ago versus now, I would assume it went up. I think the you know the concern for places like the US where there are really large domestic resources for energy production is that you know we have seen a big disconnect between what's happened to the rest of the world especially like sorry >> let me back up a second we have seen our oil tie prices go with the rest of the world like almost one for one uh aside from some very weird your imaginations dayto-day. That's a global market, right? Like the if you read an Econ 101 textbook, they will refer to the oil market as a bunch of countries pouring their oil reserves into a bathtub and then uh consumers just sort of pulling out of it. That's how the US works. That's how stateowned oil companies and other countries work. That's not how natural gas works, right? Like natural gas is extremely hard to transport over anything other than a pipeline. and the US both enjoys fairly low prices with some modicum of volatility because we have, you know, the standard seasonality other people do, but also like Europe is in deep trouble over the last couple days. I can't remember when we're actually airing this, but you know, you've seen the the gas liquefaction. How'd I do? uh you know the LG facilities in the Gulf like those have gotten hit and that is deeply threatening to European economies that were gas fired. >> The US isn't facing that. The US natural gas price has been almost flapped for the last, you know, two to three weeks as oil prices have almost doubled. And, you know, I think that you're probably seeing people in governments that have energy resources looking at those curves and saying, you know, this one doesn't seem to be moving and this other one is moving a lot and it's giving us a lot of stress. So, I think there there is a lot of concern there. I think, you know, the other side of this is that as much as we can produce more energy, it doesn't seem to be insulating us from these shocks. Uh, you know, I I I also remember the last time that the US started a large war in the Middle East and we were very concerned about energy energy independence at the time. uh we're totally independent in the air quote sense at this point but you know it doesn't seem to do anything right like we because it's it's a global market so you know I I'm not convinced that we have managed to drill our way out of this at all I think that you may you know the the optimistic take here is that uh you'll get one level deeper of thought and governments will recognize that you know filling the independence need through supply and demand create pretty different dynamics. >> Now, also uh you'll recall that uh the BLS commissioner was fired last year. Now, you sit uh I believe um uh on a division of the BLS. I I'll let you explain more um your position in more detail. Um, can you just maybe comment on um the firing of Commissioner Mant uh McCannifer and more broadly uh investors I guess concerns of whether or not we can trust government data if it appears on the surface that a commissioner is just going to be dismissed if bad data comes in. So, you know, if if good data comes in, now we're thinking, hm, did did the government approve this? Do you kind of see where I'm going going at here? Yes, I I I see where you're going because this comes up a lot and if I were to put my like policy advising hat on, I would advise any government policy maker like don't fire your statisticians. Everyone knows what you're doing. Um I think the so that was a really bad move. Uh we should not have done that. I also think that you know on the plus side we had person who stepped in was the acting commissioner under Trump one and under Obama. So there was not you know a huge reason to worry there. Also, you know, after nominating somebody originally who I had a lot of concerns about, the current like the profile of the person they have eventually nominated looks a lot like the person they fired. Um so I am optimistic that we are going to keep having independent data production and you know that there won't be some number that comes out that causes this independent or I don't know I will not speak to the independence of the person they are uh currently floating but you know we don't want independent stats to become questioned because it's really counterproductive. Uh >> yeah, >> I think the the sort of longer term question is like we know that you know much like polling almost all of the data that we are getting on labor market on prices is coming from survey data. Uh on the prices side that's like very labor intensive where there's a lot of human collection of data and then we are doing survey data to figure out exactly how much people are spending on different parts of their consumer baskets each year and we use that to figure out what you know how much to to weight up each thing. If you've followed anything about polling for 20 years you know response rates have been going down. It's not as bad for the economic data, but it's still the same trend. And you know that if you're a polling agency, that means you need to spend more money on polling. Unfortunately, you know, government data has really wide use, but they don't get to increase their polling budget. They have to go back to Congress for it. And so we've seen the real value of things like the BLS budget or things like the census budget go down over time and maintaining the same data fidelity is just really hard at this point. So I think we probably do need to spend you know we need to do more innovation in these agencies but they need more money to do it. And you know, even in the most functional state possible, begging for money for stats is always a hard ask because like it it's people who look like me who who are deeply unsympathetic who are like, you know, we really need this data so that I can tell you more about what's happening in this, you know, subindex of meat prices, which, you know, I I I need to do a better job of selling that, but it's it's always going to be a hard sell no matter how good I get Well, speaking of independence and maybe we can wrap up here. How independent do you think the Federal Reserve will be after Jerome Powell leaves? >> Man, that's a good one. Uh I mean I I think the you know the how independent it is in 2026 I'm not super worried about. We kind of know basically what the makeup of the committees are going to be. we know that Trump can't actually replace most of the people uh and therefore the majority still holds. So there's not going to be like a big disconnect in you know in its mandate over the next 6 months. You know as people start to roll off then I think that does turn into a question where you know it's not like there's a big public process that's come about where you know they have broadcast how they were going to nominate people. um you know the the current chair nominee is somebody that you know was on the very short list the last time and I can't remember the exact uh phrasing when they decided to go with renominating pal but you know it was kind of like well I I'm not sure about this guy and now it's like we're this is our guy and you know like there was there was no you know oh we've seen a lot from this man in the last eight years uh and if you've been following his publication record, but it's not like there's a whole lot going on there. So, it would be nice to have more signals that would tell us more about where that's going. >> Okay. Uh, Michael, thank you so much. Tell us where we can find your work and we'd like to follow you and get some signals from your work and figure out where we're go, where the economy is headed next. >> Thanks, David. Uh, I can't promise anywhere the economy is headed next, but uh, I am at the Roosevelt Institute. We are roseinstitute.org or and you can find me on most of the places you find uh people who do textbased social media at white matters. >> Yeah. Well, thank you once more. We'll put the links down below. So, make sure to follow Michael and the Roosevelt Institute links down there. Appreciate it once more, Michael. We'll see you next time. Take care for now. >> Thanks so much, John. >> Thanks so much for watching. Don't forget to like, subscribe,
Food Inflation Set To Surge: Economist Warns How Bad It Could Get | Michael Madowitz
Summary
Transcript
The US war in Iran has caused major disruptions globally uh when it comes to oil, crude oil, but now we're also seeing a diesel crisis. And so the question on everybody's minds is will prices of everything go up, not just gas at the pump. How will our lives be impacted? What needs to be done uh to alleviate stress on Americans? Uh Michael Madawitz is here with us. He's a principal economist at the Roosevelt Institute. Welcome to the show, Michael. Good to host you today. Welcome. >> Lovely to be here. Sort of. I want to get sort of. Are you are you disappointed with the state of the world? Are you disappointed with just the war? Are you disappointed with the house uh cost of living? You know, what what what ails you, Michael. Let's start with that. That's actually a nice bigger picture question. Well, I mean this this is actually a good question because you know obviously as an economist like we're always just the rosiest people at the party but you know like I think if we if we didn't have a war right now like we would be talking about a lot of other economic data that is not you know the smoothest sailing in the world. um you know like the basically every I was quite surprised everything we saw this month whether it was jobs data, GDP data or inflation data like there were either large downward revisions or things came in a little bit worse than we were expecting. So you know we could be having like a a moderate doom version of where things are right now even if we weren't you know dealing with all of this as they say. the last payroll numbers came out um and the economy lost 92,000 jobs and the unemployment rate ticked up to 0.1%. But we know payroll numbers are quite noisy. How are you interpreting the trend broadly speaking? >> Yeah, I think it's like we are way too early to say the labor market was pointing to a recession and I think there's been a lot of desire to say that for roughly a year, maybe a little bit longer even. Uh, I think it's really safe to say the labor market has been cooling for a while. We watch the labor market really closely in the US because it is our most reliable monthly indicator, you know, that gives us real-time data that we can trust with some very mild revisions usually. Um, it is not saying this economy is like a code red. It is this economy is is like kind of a yellow light. Uh but that said, like we're at a point where, you know, if you're looking at labor market data or uh consumer inflation data, you're not seeing the numbers you want to see. You're seeing really like flatline growth stuff, you're seeing moderate creeps up in inflation. And then, you know, if you step outside that box and look a little bit wider, look at things like producer prices, uh and and I'm not talking about oil yet, but we'll get there. uh you know th those you're actually starting to see like a lot more pressure that is a little bit worrisome going forward but you know this is not the numbers would be worried about where we're saying oh these these scream recession it's more like these are the numbers that are you know I don't know you're halfway through a marathon and you're feeling really short of breath >> I turn on the radio doesn't matter what news station and then half the time people are talking about losing jobs to AI that just seems to be the every single day. If you look at the labor data, have you actually seen any evidence from what the numbers have suggested that jobs have been lost on mass to AI? I'm not I'm not talking about Jack Dorsey cutting off half his workforce from block because of AI. I'm not talking about isolated niche tech industries or subindustry. I'm talking about the broader economy. Are we at risk of losing our jobs to AI? >> Uh I mean not not yet. Like we'll see what he can come up with. >> Okay. Uh I think the real thing here is there are a lot of different segments of the economy and we think of you know things get hit by different shocks differently. If you asked me what was going to happen with trade in 1990 I probably would have told you that you know on average most Americans would see their real incomes go up. And I would have been right, but you would have absolutely no idea that was true uh like in the aggregate numbers now where you know the vibes are that this was just terrible for everybody or I mean much more specifically in the impacted communities where lots of negative effects hit. So there's the possibility this could be really bad. If we're looking at what's going on right now, attribution is really hard. This is a little bit like climate science in some way. Like is this heat wave because of global warming? like I don't know it could just be a heat wave. Um but what we have seen a lot of in the last uh I would say I believe it's the last two graduating classes at least in the US where I've looked at the data closely uh you've seen the industries that you would expect to be impacted by AI not doing a bunch of hiring of recent graduates. Now this is complicated because those are also the industries that just went on a hiring binge in the two years before. So if you're Jack Dorsey, you are definitely going to tell people that like my wildly profitable company that may or may not show profits yet is going to get a lot more profitable because of AI. And you know, the reason we're not seeing profits right now has nothing to do with the fact that I overhired in 22. But I think there, you know, if you're looking for a signal in real data right now, hearing announcements about AI is like much more of a we're looking to the future. let us know talk talk about what we did in the past. >> Okay. Well, this leads me to uh bring up your article entitled the economy doesn't have the room to absorb this oil shock. Maybe uh tell us why uh without I'll read a few paragraphs later, but just from a high level perspective, explain this title. Why doesn't it have the room to absorb this? >> Yeah. So, I think there's been a I mean, there are a few correctives that are going on here at once. One of these is that we have in the US at least convinced ourselves that producing a bunch more oil which you know is as true as could hum be humanly possible. We are producing way more oil than we have ever or any country has ever. And I think there's this assumption that this is going to insulate us from, you know, oil shocks, which would be amazing because, you know, up to, I believe it's 2010, oil shocks were a major contributor to six of the previous seven recessions. Um, you know, we're going to give 2020 a pass because I'm not sure what you can point to other than a pandemic for that. But, you know, oil shocks are a huge contributor to big recessions. And, you know, the idea that you could get out of this by producing a bunch of oil was I don't know I'm going to call it, you know, canon among American economists, but it it it had a lot of truck. And you know, I think one of the things we need to understand is that >> whether or not we're producing the oil doesn't really matter for consumer spending. >> Like >> you are filling up your car with gas. And you know, I think as we talk more and more about what exactly is breaking right now with the straight up moose closure, uh, you know, it's becoming more and more clear that we have absolutely no idea where the oil that fills our cars up comes from. So whether or not we're freezing war doesn't have much to do with it. And then as we were discussing a minute ago, you know, it's not like you were looking at robust data coming into this. I think if we'd had a shock like that, like if this administration had come in say a year ago and the first thing they did was fire off a bunch of missiles at Iran and and touch this thing off, I think it would be really bad. Uh I think they kind of like blew that on Liberation Day. And you know, to the extent that we have the ability to walk that off, we just don't have that long term anymore. >> Before we continue with the video, let's talk about a company that's building serious gold leverage for the long term. 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Even before oil started spiking uh after the street of hormuz got closed, Michael uh the labor market has already been flatlining. both Christopher Waller uh of the Federal Reserve as well as Jerome Pal this week, they both have said in independent press conferences that the labor market didn't add any jobs net net in 2025. Um if you strip out um some seasonal data changes and also account for revisions, very important revisions. Why do you think the labor market was slowing down or at least stalling all throughout last year? major causes of this lack of growth, this stagnation, shall we say? >> Yeah. I mean, I I think part of the issue you were dealing with to begin with was, you know, if you looked at the economy in January of 24 and said, "Okay, where's the growth going to come from?" There wasn't really a big push from the labor side. It was very much a look, we're about to get inflation under control and then we can relax. Then we did a lot of things that constricted the supply side. We did tariffs uh in various measures kind of on and off throughout the year. Uh but I think more importantly we did just the most disruptive immigration policy the US has done in at least a generation or two. Uh and you know that like when we got our revisions this month like that showed up really big in the data. Uh we have a much older population than we thought we would this time last year. Uh and you know I I begrudge absolutely nobody who's worked 40 years their retirement but fact is when you don't have young people coming in and replacing them uh from the US and from our usual uh immigrant labor force that provides a lot of the growth and labor supply in the US in a lot of the growing industries. You know, this creates downward pressure on total growth, creates upward pressure on inflation, and this is where you hear things like pal saying, oh, like we're at, you know, like our break even job growth number is basically zero. So, you know, like like that's like a very clear supply side pressure. Another trend I want to bring to your attention, the deficit has been widening. Uh it's somewhat corrected uh back towards zero right after CO uh but it's now back down to roughly $1.7 trillion of federal in the red. That's the federal deficit. Um does this have any direct impact on the average American? >> I think it doesn't yet. I mean I think like it's clearly in the background like in a in a secondary sense for Fed policy right now. I think the real issue is that we are very worried about the debt going up at a time that interest rates are not going back to where they were before the crisis. >> And you know, I'm I'm a big believer in uh we never figured out why interest rates fell for 20 years. Uh and so we shouldn't just assume that they're going back to where they were 20 years before that. But as time goes on, you got to be about this, right? Like if interest rates are going up and they seem to be staying up, then it's really important to stabilize your debt payments and you can't do that if you keep growing the debt. >> So, let's bring this back to today. Uh crude oil jumping, but also uh diesel uh gas prices at the pump. We know that diesel prices meanwhile have grown even more sharply. Diesel is just under $5 a gallon according to AAA, $1.34 higher than just a month ago. Um, diesel is important because it's the bedrock of the trucking industry. Uh, presumably if diesel stays high, trucking costs go up. Everything that's being shipped via trucks, food for example, will probably need to go up unless we're seeing some sort of price control. What What's your take on uh on diesel going up in this uh this this issue here? Yeah, I think price controls on diesel would be a not brilliant idea, but you know, who knows where we go at this point. I think that diesel is a really good illustration of why it's important to have a different authority, namely the Federal Reserve looking at inflation than the politicians who are doing most policy. I think that, you know, we have a lot of focus on inflation right now. Sorry. I believe affordability is the uh the term of art right now. But you know, if you're talking to Americans, they are very focused on what it costs to fill up their car. That's gasoline. Cool. We need to get gas prices down. Uh we don't need them to go up what, a dollar in a week or whatever it's been. Uh on the other hand, you know, if you were worried about uh you know, not just Mike today, but Mike in 6 weeks, Mike in 6 weeks, it you know, assuming everything gets resolved on like tomorrow, uh which seems maybe unlikely, but go with me here. If everything gets resolved tomorrow, Mike is thrilled to gas up his car. Uh Mike is bummed because then Mike goes to the grocery store and everything's really expensive because the farmers are filling up their tractors with diesel and they have to pass that on and then they're shipping their goods to market with trucks that run on diesel and that gets passed on. So there's a sort of short-term we're seeing things at the pump immediately and then there's a longer term that's showing up you know maybe like I think if you're a trucker you're very aware of the German diesel crisis but you know you've seen like other grades of fuel diesel shipping fuel uh not gas but jet A which is kerosene right like these grades are going way up and you know I think that's like a like because a lot of that is refined in the Gulf before it gets shipped out. And that's a big concern in the sense that those all pass through to other prices, but they take longer to show up. So, we're a little less on top of >> So, how long how long is this lag before we have uh prices actually show up um from higher fuel prices? Oh man, this is where you make me look stupid because, you know, if you asked me two weeks ago, I would not have possibly believed that crude prices would be where they are right now. Uh because I was looking at quantities and and quantities do not say what you would infer from headline crude prices. And I guess like you're seeing some of this where like the you have big spreads in a lot of localized markets where it's like okay but if you actually want physical bar barrels of oil you have to pay a lot more than the Brent price. But you know so far uh this seems to be more of a quantity story than a price story. And that could eventually even out positively but it could also even out in a really bad way. Food prices have already been climbing throughout 2026 uh from the beginning of the year till now and it's not directly because of diesel going up which was a relatively recent event. This is from the uh USDA food price outlook 2026. Uh the level of food inflation vary depending on whether the food was purchased for consumption at home or away from home. Uh but basically the forecast is in 2026 prices for all food are predicted to increase 3.1% with a prediction interval of 0.7 to 5.7%. Food at home prices are predicted to increase 2.5%. Food away from home prices are predicted to increase 3.7%. I don't want my food bills to go up. I don't think you do either. What's causing this? How do we make it stop? So, I don't know exactly what's going into those numbers because I can't remember when this one came out, but I I mean I think like the important thing here is we were already worried about food prices and >> a lot of I mean we will talk about fertilizer in a second. >> A lot of what's going into food at home prices >> are intermediate inputs and various shocks that have been hitting these for the last two to five years really. Um I I don't quite understand why we never recovered as as fully as we thought we would from the CO shocks, but I mean we really haven't. Uh and and I think that's like a good illustration that we're, you know, we're still expecting 2 and a half% food inflation. That said, like these are these are not the numbers that should be particularly worrying a wealthy country like America. Um I I I will be I mean I'm yes, I'm a red-blooded American. I will like swear up and down every time I like put something in my grocery cart and the price is 50 cents higher than it was last year. But ultimately like we can mostly swing this because food is a really small portion of our expenditures. The problem is you know if you're already looking at 2 and a half% and then you shock the whole economy particularly uh sectors like fertilizer production that are super dependent on natural gas exports in the Gulf. you know, that gets a lot harder to figure out both how large the shock is and and sort of when it's going to happen. And so, you know, a we don't know how big the shock is. B, we don't know when to sound the all clear and say, okay, this leveled out at 2 and 1/2 or 4 and 1/2 or 7 and 1 half%. And I think, you know, people are right to be a little concerned about that. And and I think there's probably an additional layer of having gone through the first real inflation shock that I'm not going to the good news is we're on Zoom. Hopefully it's smoothed out some of my wrinkles. You look flawless. I'm not going to guess at your age. This is like the first really big inflation shock on the upside that I can remember in my lifetime. I'm guessing it is in yours. And you know, I think like everyone is kind of getting their heads around that. >> Uh yeah, I mean CO was probably the first time in my life that I've experienced really really high inflation in a very short amount of time, but CO had the exact opposite effect when it came to gas and I also didn't have a car at the time, so I didn't care personally. Um if gas goes up either way, >> every time your airplane tickets, right? Um less so now. >> Exactly. But generally speaking now, right, how how much further does gas have to go before Americans really start cutting back on discretionary items like plane tickets, like vacations because it's just eating into their pocketbooks. Yeah, this is like another piece where you know the I I think one of the things that I was telling people over the last week is you know you have financial markets data which is very forward-looking and very speculative and then you have real economy data which is very concrete and really well measured and unfortunately is like entirely about what's behind you. Uh I think that we were already seeing pretty high inflation in things like airfares. You know, historically gasoline is not really a thing that Americans are particularly good at throttling back on in the in the short term, right? Like uh if I want my house to be 75°, I do that with a thermostat, which kicks on some piece of equipment I bought 20 years ago. if I want to use less gas, you know, maybe I lift and coast, as they say in the F1 uh genre. But, you know, there's there's just not much you can do there. And so, you know, these these things come down to capital goods. And I think on the plus side, we actually do have a much less oil dependent economy than we did 10 or 20 years ago. But that doesn't mean we're fully insulated. It just means it hits us less aggressively and maybe you know I I think there there is a perception as well because if you look at the efficiency of the cars that we drive that's gone up a ton. If you look at the efficiency of the trucks that are shipping the food around the country you know that hasn't changed a whole lot at all. >> So this leads me to wonder if globalization is coming to an end. Uh if I'm sitting here as a world leader thinking about how to hedge against this kind of crisis or disruption in the future, maybe my advisors may be asking me trade less, be more self-sufficient on fertilizers, for example, which I was just showing an article of Tennessee farmer now has to pay an additional $100,000 more for fertilizer this season, according to an article from Fortune. Anyway, the point is things are going up in price. Disruptions are happening across many industries, not just oil. And perhaps countries will trade less with each other and become more protectionist in the future. Is that the path in which we're headed, Michael? >> Uh I mean I I don't know this that's like a solution to this problem, but that I mean, you know, if if you asked me about public support for that a month ago versus now, I would assume it went up. I think the you know the concern for places like the US where there are really large domestic resources for energy production is that you know we have seen a big disconnect between what's happened to the rest of the world especially like sorry >> let me back up a second we have seen our oil tie prices go with the rest of the world like almost one for one uh aside from some very weird your imaginations dayto-day. That's a global market, right? Like the if you read an Econ 101 textbook, they will refer to the oil market as a bunch of countries pouring their oil reserves into a bathtub and then uh consumers just sort of pulling out of it. That's how the US works. That's how stateowned oil companies and other countries work. That's not how natural gas works, right? Like natural gas is extremely hard to transport over anything other than a pipeline. and the US both enjoys fairly low prices with some modicum of volatility because we have, you know, the standard seasonality other people do, but also like Europe is in deep trouble over the last couple days. I can't remember when we're actually airing this, but you know, you've seen the the gas liquefaction. How'd I do? uh you know the LG facilities in the Gulf like those have gotten hit and that is deeply threatening to European economies that were gas fired. >> The US isn't facing that. The US natural gas price has been almost flapped for the last, you know, two to three weeks as oil prices have almost doubled. And, you know, I think that you're probably seeing people in governments that have energy resources looking at those curves and saying, you know, this one doesn't seem to be moving and this other one is moving a lot and it's giving us a lot of stress. So, I think there there is a lot of concern there. I think, you know, the other side of this is that as much as we can produce more energy, it doesn't seem to be insulating us from these shocks. Uh, you know, I I I also remember the last time that the US started a large war in the Middle East and we were very concerned about energy energy independence at the time. uh we're totally independent in the air quote sense at this point but you know it doesn't seem to do anything right like we because it's it's a global market so you know I I'm not convinced that we have managed to drill our way out of this at all I think that you may you know the the optimistic take here is that uh you'll get one level deeper of thought and governments will recognize that you know filling the independence need through supply and demand create pretty different dynamics. >> Now, also uh you'll recall that uh the BLS commissioner was fired last year. Now, you sit uh I believe um uh on a division of the BLS. I I'll let you explain more um your position in more detail. Um, can you just maybe comment on um the firing of Commissioner Mant uh McCannifer and more broadly uh investors I guess concerns of whether or not we can trust government data if it appears on the surface that a commissioner is just going to be dismissed if bad data comes in. So, you know, if if good data comes in, now we're thinking, hm, did did the government approve this? Do you kind of see where I'm going going at here? Yes, I I I see where you're going because this comes up a lot and if I were to put my like policy advising hat on, I would advise any government policy maker like don't fire your statisticians. Everyone knows what you're doing. Um I think the so that was a really bad move. Uh we should not have done that. I also think that you know on the plus side we had person who stepped in was the acting commissioner under Trump one and under Obama. So there was not you know a huge reason to worry there. Also, you know, after nominating somebody originally who I had a lot of concerns about, the current like the profile of the person they have eventually nominated looks a lot like the person they fired. Um so I am optimistic that we are going to keep having independent data production and you know that there won't be some number that comes out that causes this independent or I don't know I will not speak to the independence of the person they are uh currently floating but you know we don't want independent stats to become questioned because it's really counterproductive. Uh >> yeah, >> I think the the sort of longer term question is like we know that you know much like polling almost all of the data that we are getting on labor market on prices is coming from survey data. Uh on the prices side that's like very labor intensive where there's a lot of human collection of data and then we are doing survey data to figure out exactly how much people are spending on different parts of their consumer baskets each year and we use that to figure out what you know how much to to weight up each thing. If you've followed anything about polling for 20 years you know response rates have been going down. It's not as bad for the economic data, but it's still the same trend. And you know that if you're a polling agency, that means you need to spend more money on polling. Unfortunately, you know, government data has really wide use, but they don't get to increase their polling budget. They have to go back to Congress for it. And so we've seen the real value of things like the BLS budget or things like the census budget go down over time and maintaining the same data fidelity is just really hard at this point. So I think we probably do need to spend you know we need to do more innovation in these agencies but they need more money to do it. And you know, even in the most functional state possible, begging for money for stats is always a hard ask because like it it's people who look like me who who are deeply unsympathetic who are like, you know, we really need this data so that I can tell you more about what's happening in this, you know, subindex of meat prices, which, you know, I I I need to do a better job of selling that, but it's it's always going to be a hard sell no matter how good I get Well, speaking of independence and maybe we can wrap up here. How independent do you think the Federal Reserve will be after Jerome Powell leaves? >> Man, that's a good one. Uh I mean I I think the you know the how independent it is in 2026 I'm not super worried about. We kind of know basically what the makeup of the committees are going to be. we know that Trump can't actually replace most of the people uh and therefore the majority still holds. So there's not going to be like a big disconnect in you know in its mandate over the next 6 months. You know as people start to roll off then I think that does turn into a question where you know it's not like there's a big public process that's come about where you know they have broadcast how they were going to nominate people. um you know the the current chair nominee is somebody that you know was on the very short list the last time and I can't remember the exact uh phrasing when they decided to go with renominating pal but you know it was kind of like well I I'm not sure about this guy and now it's like we're this is our guy and you know like there was there was no you know oh we've seen a lot from this man in the last eight years uh and if you've been following his publication record, but it's not like there's a whole lot going on there. So, it would be nice to have more signals that would tell us more about where that's going. >> Okay. Uh, Michael, thank you so much. Tell us where we can find your work and we'd like to follow you and get some signals from your work and figure out where we're go, where the economy is headed next. >> Thanks, David. Uh, I can't promise anywhere the economy is headed next, but uh, I am at the Roosevelt Institute. We are roseinstitute.org or and you can find me on most of the places you find uh people who do textbased social media at white matters. >> Yeah. Well, thank you once more. We'll put the links down below. So, make sure to follow Michael and the Roosevelt Institute links down there. Appreciate it once more, Michael. We'll see you next time. Take care for now. >> Thanks so much, John. >> Thanks so much for watching. Don't forget to like, subscribe,