Economic Indicators Flash Red: Is Market Chaos Next? | Dana Peterson
Summary
Market Outlook: Broad uncertainty dominates CEO sentiment, with caution around geopolitics, regulation, and policy shaping a wait-and-see stance.
Federal Reserve: Expectation of 0-2 rate cuts depending on inflation and labor data, while structurally higher Treasury yields raise corporate funding costs.
Consumer Behavior: Spending remains resilient due to employment, but is shifting to necessities and lower-cost options amid persistent price pressures.
AI Theme: CEOs view AI as a disruptive but essential tool, prioritizing adoption across supply chains, marketing, and productivity despite challenges measuring ROI.
Corporate Investment: Firms are maintaining prior plans but hesitant to expand capex; focus is on technology enablement and workforce upskilling rather than aggressive hiring.
Labor Market: Tight labor conditions persist with ongoing wage growth; shortages in skilled roles drive training and internal capability building.
Geopolitics/Tariffs: Tariff policy and regional risks (Asia, Middle East, Europe, Latin America) threaten supply chains and sentiment, adding to planning uncertainty.
Transcript
Uncertainty is kind of the word for the year. There's no indication that they're going to invest more or and there was some indication that they're going to invest less. CEOs all over the world are very uncertain about geopolitics, policy, regulation in the in the markets that they operate in. They say it's disruptive in a negative way. We've priced in one in March and that would be 25 basis points and then another in June and I think that's probably going to be it or potentially even zero. It really depends on where inflation goes and if the labor market continues to hold up. Pleased to welcome to the show Dana Peterson. She is a chief economist, leader of the economy strategy and finance center at the conference board. The conference board puts out leading econ economic indicators for the US and global economies. their widely followed indicators uh used by economists, analysts and hedge fund managers alike. And we'll talk about also uh their surveys that they've conducted focusing today on seuite sea level um executive surveys that they've recently released. Welcome to the show Dana. It's very good to host you. Thank you for being here. >> Thanks for having me. Before we get into the CEO surveys themselves, which in themselves are very good leading indicators, I some would say for where the economy is headed, let's talk about what you think should be the primary indicators or indicator singular that economists should follow for 2026 to gauge the direction of the economy focusing on the US first. >> Sure. Absolutely. I think a lot of it has to do with consumer spending and also consumer confidence. Um, we produce a consumer confidence measure as well as a CEO confidence measure. But CEOs are very interested in knowing what their c their customers are thinking. And indeed, the outlook is not very good. Many consumers are concerned about business environment uh over the next 6 months as well as their own employment opportunities and even their incomes and certainly finances. When they think about their finances, they're concerned uh for the for the future. Um, we've also seen consumers anticipate that interest rates would actually go higher and not lower, which is a challenge certainly for the housing market. Um, and also consumers expect that they're still going to be um, saddled with higher prices, elevated prices, even if the price, the rate of price increases slower. >> You've worked on Wall Street before you were involved with the conference board. So just give us a sense of uh what Wall Street follows when making uh guidance and I guess financing decisions generally speaking. >> Absolutely. I mean number one is the Fed. So whatever the whatever the Fed is doing or uh they think the Fed is going to do um Wall Street folks tend to pay very close and attention to that. But but then it's like well what is the Fed interested in? The Fed clearly has a dual mandate. One is price stability. The other is maximum employment. And so we know that the Fed has said that they've been pleased with the direction of inflation um getting closer and closer to their 2% target. Um but they did have and continue to have concerns about the labor market. Although when I look at the labor market over the last, you know, four or five months, we haven't really seen it much any of anything different. We're seeing very small payroll gains, which is consistent with not being too far away from >> uh being which is not inconsistent with being too far away from neutral. Um or and also when we look at wages, they're still growing at a rapid clip and very few people are getting laid off and that's also a reflection of CEOs being uncertain. So, they're just holding on to their workers, waiting to see what's going to happen with tariffs, regulation, uh, government spending, and they're just not really hiring. So, we do see a little bit of a pileup in people who are finding difficulty finding a new job, but we're not seeing new layoffs. And so, I think all of those things um suggest that the Fed can probably sit back in January, not touch interest rates, and think about it maybe for March or even June. Um, so I think that's what Wall Street people are really focused on. How does the Fed view the economy? Even if the unemployment rate doesn't continue to rise up from here and even if the inflation rate continues to go up and I will get your outlook on inflation in the unemployment range just a bit Dana but even if inflation continues to rise can we still expect a dovish Fed given that Jerome Pal Fed chair current Fed chair has just put out a bombshell video admitting or in his opinion that the only reason he got subpoenaed by the DOJ was because the Fed uh was asked by the president to lower interest rates and they did not comply. And so he's basically admitting that there was political pressure to lower the interest rate. How far will this political pressure go even despite the data warning us that inflation will go higher? Data. Yes. Well, I don't think that the pressure on the Fed will go away. I mean, this is actually nothing new. Since the Federal Reserve system was put into place more than a 100red years ago, there was always resistance. Um certainly in the middle of last century, the Fed was given much more independence. um because we've seen that movie before in other countries where uh central banks did not have independence and they were pressured by politics. Um so what we're seeing now is not a new phenomenon but it is quite surprising and I have a feeling that uh policy makers monetary policy makers will continue to look at the Fed as solely focusing on monetary policy and that fiscal policy stays in its fiscal policy space and that they're going to continue to watch the economy the economic data that are coming out and make the decisions based upon that not on any short-term political desires or whim. Well, we have the CME Fed watch tool uh basically telling us that there's not going to be any sort of movement in the Fed funds rate at the next meeting which is going to be two weeks from well 12 days from now exactly. Um and then further out in the year uh the probability gets a little bit higher but not by much. Uh how many rate cuts can we expect realistically this year? Dana, >> we've priced in one in March and that would be 25 basis points and then another in June and I think that's probably going to be it. um two more or potentially even zero. It really depends on where inflation goes and if the labor market continues to hold up. Um but if the labor market starts to deteriorate materially where you see hours falling, also lots of people being let go and key industries that we know are haven't already been consolidating, then I think that's going to disturb the Fed and they probably would go ahead and cut at least twice. But if we don't see that acting, the Fed's probably they may even say we're here, we're at neutral. They already said that they were very close to neutral. >> Well, this is the leading e economic indicator, the lei that the conference board publishes. Uh these red horizontal lines are recession signals and they've been triggered a couple of times now just in the last couple couple of years. Specifically, 2024 was the most recent episode. 2025 as well. Why hasn't there been an official Enber designated recession then Dana? >> Sure. I think there are two factors here. Number one is the the components of the leading economic indicator and it it works for the components that we've asked it to look at. So basically it did capture the slump in manufacturing also the housing uh weakness. It also, you know, looks at the labor market, but it's looking at changes in the leading economic indicator. And so even if the change is coming from a low base, it still picks it up as something negative. Um, and also consumer and CEO confidence um over the last few years has been weak um even though we never went into a recession. So that's the first thing. There are other areas of the economy that have done quite well like services were very strong and also when we look at the labor market other labor market measures most people are working and we reached maximum employment according to the Fed late last year and so I don't think we're very far away from it and so as long as consumers are working they have incomes um and they feel generally good they will continue to spend. Um but again we did have big shocks in 2025 in terms of changes in taxes as well as uh changes in government spending for consumers and the tariffs which do feed through to inflation. Um but nonetheless um the data we have uh so far which isn't much is that yes consumer spending has slowed a bit but consumers are still getting out there. >> Before we continue with the video, let's talk about today's sponsor, Delete Me. Most New Year's resolutions fail because they require constant effort. But protecting your online privacy doesn't have to. 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Is it true that we actually have a K-shaped economy? is that what you're observing? >> There's always a K-shaped economy, even during the Sure. >> During even during the great financial crisis and during the pandemic, um you always have uh you know, a subset of the population who have more wealth um or just more income and they're going to continue to spend. They're just less conspicuous about it. They'll, you know, not get a logo bag. They'll just get a plain white bag or they go to Bloomies, they just get the large bag. Um, consumers who are not as wealthy are definitely still spending. They're just changing. They're just shifting what they're spending on. They're having to prioritize goods and services that they need like food, housing, utilities. Those are the things that they need. Um, and when they do engage in spending on things that are quite discretionary, they will choose the cheaper option. For example, our consumer confidence survey consistently shows that people will go out to restaurants and they'll stream, but they won't, but the types of restaurants they're going to are cheaper and they'll stream TV instead of taking the whole family to the movies, which costs more. So, consumers are changing their behavior. And you also are seeing people who are just buying fewer things. If they don't need it right now and they don't want to finance it with buy now, pay later or credit cards, then they just kind of pull back. >> Let's talk about the CEO CEO survey now. Uh Dana, and before we get into the results, maybe walk us through the history of the survey first and ultimately uh why looking at CEOs and what they think is important when analyzing the economy and then we'll talk about the results themselves. Yes, our seauite outlook survey is something that we've been doing for 27 years now where we canvas CEOs and other members of the seauite plus board members across the globe and certainly we do deep dives in the US, Europe and also Asia including China uh Japan Azion and Australia and so what we've seen uh at least for this year we just released our survey is that uncertainty is kind of the word for the Um CEOs all over the world are very uncertain about a number of things. Uh geopolitics, policy, regulation in the in the markets that they operate in even structural shifts like fewer people uh working uh because people are aging out and also the biggest thing that many CEOs are focused on they say the biggest shift is AI that is a major structural shift. They say it's disruptive. They say it's disruptive in a negative way, but they also see AI as a solution to a lot of their problems. And indeed, they are changing their business models to enable their people and their operations to become more technologically savvy and also um incorporating new technologies like AI to overcome the uncertainty. The uncertainty last year was sur was mostly surrounding the trade uh deals that uh the US had made with the world. Tariff uncertainty CEOs were uncertain as to uh how they could expand their business if uh import duties were to be raised and uh and they were uncertain as to whether or not these tariffs would be um persistent other than rather than transitory as POW might say. But uh Dana, what about this year? What are the top causes for uncertainty this year? Is it still tariffs or something else? >> Yes, indeed. Um uncertainty was number one for economic uh issues, but second to that was definitely tariffs. Um also economic recession and downturns especially among European and Asian CEOs. Um so also just uncertainty about governance. um with uh the greening of the global economy, multinational firms have to be focused on sustainability more in certain regions than others. They're also very uh concerned about politics internally in the markets that they operate in. And uh moreover, they're very uncertain about how AI is going to impact their businesses. Many of them are trying to get ahead of the curve. and and and interestingly the most important human capital issue was how do we what effects will AI have on our people and how do we prepare them for the next digital age >> I guess you'll find out in the next uh next survey that you do uh but geopolitical uncertainty has that ever popped up in the last year uh and especially this year after what happened with Venezuela uh talks with disbanding NATO um has that affected seale decision making it all. Dana, >> yes. And um we actually did ask a question about geopolitics and what what rose uh to the top was not necessarily conflict like kinetic conflicts but certainly uh political polarization um also shifting dynamics in terms of regulation. And there's also and when we did ask about regional issues, Asia was very much concerned about um well I would say Japan was very much concerned about uh a confilration with China. Um other Asian economies were more concerned about the Middle East because many of them are purchasing oil from the Middle East. And in uh North America um a lot of it was a big I'm sorry in Western Europe it was about Eastern Europe. So with the US it was less about conflict. But again this survey was done uh you know a little bit before the US uh and Venezuela situation occurred. And I would imagine that if we ask today um US and North America CEOs, they might actually raise uh conflict in Latin America or or Central America or even in uh you know the Arctic as a concern. And the reason why is because it impacts supply chains. Um you could potentially have have to move your ships around conflicts that are going on in the waters. And it also impacts your labor force. not only if you have laborers and operations close to these areas but also psychologically and indeed one thing that was surprising is that CEOs are prioritizing mental health as a focus uh to invest in um not only for uh understanding their customers but also for their workers. >> Mental health for their their workers not for themselves. >> Correct. mental health for the workers and also as a societal issue which also means their customers kind of understanding the zeitgeist and how they can help not only their customers but also their workers uh make sense of everything that's going on and stay focused and productive amid these existential things. >> Well, I'm curious how this uncertainty translates to hiring specifically. So, we've got CEOs uncertain about uncertainty and also the second issue tariffs that you brought up here in the uh uh article from the conference board sites. Uh they're also uncertain about the ROI of AI spending which I'll touch on in just a bit. So, what does this mean for employment overall data? Well, we did ask them what are you going to invest in or what are you going to do to promote uh uh higher profits and also regarding human capital, what are you going to be doing? And you know, cutting workers was not high on the list. It was more so investing in our workers. Again, um you have these technological changes. um it's much more tangible and customers whether they be business B2B or B TOC are using more technology it's part of their lives and so businesses are focused on making sure that all their operations are using technology to optimize what they're doing but also to maximize the capabilities of their workers to ensure that their workers are ready for this next digital age and that they can accommodate the customers who are demanding things quickly and they want the convenience of things being digital or online. >> Did CEOs answer any questions about wages and whether or not they're going to raise keep wages the same or lower wages this year? >> Well, we didn't ask that in our seed outlook survey, but we have asked that in our quarterly US survey of CEOs and for the most part they are still raising wages, but not as aggressively as they had been. So I think that's a function of labor shortages. Indeed, many industries need workers. So that includes the financial sector um needing high-end workers as well as the construction se sector uh health care um all these sectors and along all the different types of occupations. We don't have enough people who are skilled and that's the other thing even in the industries that can tap into a lot of people. The question is do they have the right skill set and companies are actually looking to bring on people who are unskilled and actually train them in the areas that they need them to be because they're just that desperate for workers. >> And let's talk about AI investments. So that this is a bit of a little little bit of a in my opinion kind of a contradiction here with what what they think and what they're doing. So uh according to your survey their concern exceeds uh yeah their the conference board service found CEOs worldwide struggling to pin down AI's business value. 33% of CEOs globally say their top AI priority is measuring the their ROI. Another article here from the Boston Consulting Group says that four out of five CEOs are more optimistic about the ROI of their AI investments than they were a year ago. I don't know if they're asking different CEOs, but um it certainly looks like C uh AI capex is on the rise even if executives claim they are concerned about ROI, return on investment. So how do you reconcile this kind of you know difference here? >> Yes, absolutely. Over the last three years, we have asked CEOs all over the world and especially in the US about AI and uh they they see great things for AI. They really and many of them even think it's going to increase the bottom line. But the issue is not that they don't want to use AI or they're afraid of it. They just don't know how to measure if it's working. And that's the tough part. Uh it's intangible. Um and certainly I mean you can count hours of how long it takes uh your workers to do something. For example, um we've been able to uh expedite how we sort through tons of data um or even text using AI. Um we do write our own stuff of course but uh that's but still no one's sitting there counting right how many hours did we save. All we can say is well you know last year we did the same thing it took us 2 weeks and then we utilized AI put all of our content in it asked it to sort it out and it did it in a minute right but again that's difficult to quantify but nonetheless um again CEOs do think that AI is something that is is disruptive but they also see it as a good thing. In fact, we always ask we always ask about supply chains and three years in a row, the answer has been we are going to use AI to operize our supply chains. It continues to be number one. Um they're also looking at using AI in marketing, not just to ideulate things for marketing and communications, but to use AI as a tool. Um they also are looking at productivity and like I said they want to train their employees to use AI. Um whether it's uh to help better service their customers or to increase their ability to code things whatever it is um they are looking at AI as a as a savior and also um a way to really enhance what they're already doing. >> This is the uh St. Fed uh M2 money supply and I've shown this chart on a uh annual percentage change basis. So it's growing at the well according to the latest data that came out in November it uh it's growing at 4.2%. So it is on the rise data. Have you noticed in the past a correlation between uh the growth of the M2 money supply versus capex spending from companies? Are they related do you think? >> Um I don't think so because most companies aren't buying and doing things in cash. they're usually going to the market to get to get capital. >> Um and so >> and capital is is private essentially but also over the last few years capital at least in the US and and even um in places like China has come from the government in terms of industrial policies and also deregulation. So I'm not sure it's so much uh the supply of money but the access to credit. Well, how would you how would you rate the access to credit this year versus last, especially given a more dovish Fed? We we think is going to be a more dovish Fed. >> For companies, it really depends on what type of company you are and what industry you're in. Um because that'll determine whether or not you're going to be lent any credit. Also, uh it all it depends on what exactly you're investing in. And certainly with the Fed lowering interest rates, that does help with the cost of capital. That's quite material, I would say, for smaller businesses who are more likely using credit cards um to finance uh their operations and their investments. But larger firms, you know, again, they're going to go to private capital. Um and again, it's whether or not you're in a hot industry or not. and and oftent times that capital um may not be benchmarked off of the Fed funds rate or you know stacked up from the Fed funds rate but reflect what's going on in longerdated Treasury yields and we know that Treasury yields have been high and elevated. Um and certainly we saw various girrations last year and we're seeing it again this year. But in general, uh going forward, Treasury yields are just going to be higher because we continue to have outsized debt in the US and we continue to spend um and cut taxes and those all contribute to further debt going along and and investors so far they're still keen to purchase US treasuries um because there's there limited options elsewhere. But every time we have some kind of conflration in terms of a shutdown or butdding up against the the debt ceiling, investors lose confidence and that drives up treasury yields and that impacts corporate debt um or at least the yields at which uh corporate corporations are going to have to face when they get funding. >> Well, speaking of confidence, this is the consumer confidence index that the conference board has put out. uh any relationship here between the confidence index of the consumer versus the confidence index or the confidence level overall of the uh seale executive first of all. >> Yes. For the most part they're they're consistent in terms of falling over the last year. Yeah. >> And also just being concerned not only about current conditions but the future. Um the interesting thing about businesses or CEOs of large firms is that for most of most of the time they will say okay the economy is looking soft we're concerned about it but then when you ask them about their own industries they're like oh well we're fine but we saw a shift in that confidence level and where they were less less optimistic about their own industries going forward. Um and amid that they are just kind of remaining on the sidelines. They're not looking to really hire people. Um again, labor shortages and finding the right person skills um is preventing them from letting go people um just kind of sticking with what they have. And also when it comes to investments, if they already plan to invest in something in the past, they're just going the course. But there's no indication that they're going to invest more or and then there was some indication that they're going to invest less. >> So I how much ultimately how much of these indices actually become a self-fulfilling prophecy? So in the case of the consumer for example, if they're less confident, does that actually mean in a couple months they will spend less or travel less, whatever the case may be? And for the case of uh in the case of the CEO, if they're less confident in their own sector, how much of that means they're actually going to hire less, spend less, and perhaps even perform worse than they were when they were feeling more confident before? >> Sure. Let's first start with the consumer. >> Consumers can feel one way and do something else. And so even though consumer confidence has continued to flag and within the details, they're complaining about prices and taxes and they're also saying that we're switching to buying things that we need, not things that we want. They're still buying things. They're still spending because they're employed. And I think that's why we didn't go into recession over the last few years because even though prices are rising aggressively and after those big price increases, those changes, the level of prices are high, they still have income and because they're working. And so as long as consumers have jobs, they may complain, but they will continue to consume even if the the composition of spending changes. And looking at businesses again, many businesses have the capacity to invest. They just don't want to make big investments that they haven't already planned because of the uncertainty. They don't know what's coming down the pipeline. Many of them were waiting for massive amounts of deregula deregulation. That just doesn't happen yet. And even still, even those companies uh those industries like tech and finance who did experience deregulation now they're also getting signals um from the administration that they need to participate in making the US more affordable. So it's like, you know, there's this give and take. And so I think as long as businesses don't really know what the path looks like or and there's also this regulatory and policy uncertainty, they're going to hold back unless they just feel adamant about making big investments. But again, I mentioned that CEOs are changing their business models. And those changes might be um pulling back on something or holding off on something or charging forth with something else that is less dependent upon external factors like geopolitics or policies within uh the US itself. >> So third quarter 2025 GDP grew at a 4.3 annual uh annualized rate. Uh let's just finish off on your economic growth outlook. What is the conference board projecting for economic growth GDP growth this year? So yes, we've actually upgraded our GDP outlook a little bit for the United States for 2025 and 2026. Um the upgrades to 2026 mainly focused on the very strong Q3 data. Now consumer spending was stronger and better than we expected. So potentially um the BEA received additional data after uh the monthly reports. Um but there was also still some questions about how imports and exports and also inventories behaved that ended up really boosting the number and we still need more data and there probably will be revisions. Um but nonetheless that was really the main change um for 2025. Now we also upgraded 2026. We think we're going to grow around 2.1%. That's a little bit slower than 2025, but again, I think a lot of that's going to reflect faster growth later in the year. Um, as some of the uncertainties around tariffs are are are addressed. And also, as we see inflation, it's probably going to rise a little bit in the first half, but then kind of cool off later on. And plus, we anticipate that businesses will, you know, start investing again, certainly as many of the uncertainties that we've already talked about kind of fade. >> Yeah. All right. Finally, God, Dana, I'm just um on a more personal note, curious how one can become chief economist at a firm like the Conference Board. So for the younger people watching out there who are picking career paths who are interested in economics, tell us about I don't know if there's a standard or a recommended um path from college all the way to first second job and then eventually moving on to senior economist positions. Uh what does that look like in 2026? >> Sure. I still think there's plenty of room for economists um and especially young ones who um can learn from the older ones who've lived through a few cycles. Uh but certainly I I think certainly getting experience in different areas is important. So I started out at the Federal Reserve Board. So that's you know the central bank uh quasi governmental and then I worked on Wall Street for many many years. So, I got that private sector uh client face-to-face type of experience and then uh I was invited to become the chief economist at the conference board and I think you know having the background with being in the mix of monetary policy but also interacting with very senior people at companies with tons of money um helped me to kind of be that person who can come into the conference board and not only have the perspective of Wall but also to have a perspective of what's really important for CEOs of very large companies, multinationals and also their seauite. >> Does it really matter what u what students study in in university to prepare? I mean is it is it more of a math or STEM focus or economics focus that uh employers care about these days? So absolutely you need the theory but you also need technical experience because so coding so computer science is very important and also I think hands-on experience certainly um interning at an economic shop or or even in a strategy shop where you can learn how to watch the data, how to monitor economies, what to look for, what to expect in order to have that instinct because it's not all about numbers and models. It's also about judgment and having that good judgment takes time to hone, but it's so exciting when you have that. >> All right. Excellent. Thanks so much, Dana. And uh we'll catch up next time. Appreciate your insights and your updates for us. Where can we follow you and your work? >> Absolutely. tcb.org. >> Okay. We'll put the link down below. So, make sure to follow the conference board there. Appreciate it once again, Dana. Take care for now. >> Thank you. >> Thank you for watching. Don't forget to like, subscribe.
Economic Indicators Flash Red: Is Market Chaos Next? | Dana Peterson
Summary
Transcript
Uncertainty is kind of the word for the year. There's no indication that they're going to invest more or and there was some indication that they're going to invest less. CEOs all over the world are very uncertain about geopolitics, policy, regulation in the in the markets that they operate in. They say it's disruptive in a negative way. We've priced in one in March and that would be 25 basis points and then another in June and I think that's probably going to be it or potentially even zero. It really depends on where inflation goes and if the labor market continues to hold up. Pleased to welcome to the show Dana Peterson. She is a chief economist, leader of the economy strategy and finance center at the conference board. The conference board puts out leading econ economic indicators for the US and global economies. their widely followed indicators uh used by economists, analysts and hedge fund managers alike. And we'll talk about also uh their surveys that they've conducted focusing today on seuite sea level um executive surveys that they've recently released. Welcome to the show Dana. It's very good to host you. Thank you for being here. >> Thanks for having me. Before we get into the CEO surveys themselves, which in themselves are very good leading indicators, I some would say for where the economy is headed, let's talk about what you think should be the primary indicators or indicator singular that economists should follow for 2026 to gauge the direction of the economy focusing on the US first. >> Sure. Absolutely. I think a lot of it has to do with consumer spending and also consumer confidence. Um, we produce a consumer confidence measure as well as a CEO confidence measure. But CEOs are very interested in knowing what their c their customers are thinking. And indeed, the outlook is not very good. Many consumers are concerned about business environment uh over the next 6 months as well as their own employment opportunities and even their incomes and certainly finances. When they think about their finances, they're concerned uh for the for the future. Um, we've also seen consumers anticipate that interest rates would actually go higher and not lower, which is a challenge certainly for the housing market. Um, and also consumers expect that they're still going to be um, saddled with higher prices, elevated prices, even if the price, the rate of price increases slower. >> You've worked on Wall Street before you were involved with the conference board. So just give us a sense of uh what Wall Street follows when making uh guidance and I guess financing decisions generally speaking. >> Absolutely. I mean number one is the Fed. So whatever the whatever the Fed is doing or uh they think the Fed is going to do um Wall Street folks tend to pay very close and attention to that. But but then it's like well what is the Fed interested in? The Fed clearly has a dual mandate. One is price stability. The other is maximum employment. And so we know that the Fed has said that they've been pleased with the direction of inflation um getting closer and closer to their 2% target. Um but they did have and continue to have concerns about the labor market. Although when I look at the labor market over the last, you know, four or five months, we haven't really seen it much any of anything different. We're seeing very small payroll gains, which is consistent with not being too far away from >> uh being which is not inconsistent with being too far away from neutral. Um or and also when we look at wages, they're still growing at a rapid clip and very few people are getting laid off and that's also a reflection of CEOs being uncertain. So, they're just holding on to their workers, waiting to see what's going to happen with tariffs, regulation, uh, government spending, and they're just not really hiring. So, we do see a little bit of a pileup in people who are finding difficulty finding a new job, but we're not seeing new layoffs. And so, I think all of those things um suggest that the Fed can probably sit back in January, not touch interest rates, and think about it maybe for March or even June. Um, so I think that's what Wall Street people are really focused on. How does the Fed view the economy? Even if the unemployment rate doesn't continue to rise up from here and even if the inflation rate continues to go up and I will get your outlook on inflation in the unemployment range just a bit Dana but even if inflation continues to rise can we still expect a dovish Fed given that Jerome Pal Fed chair current Fed chair has just put out a bombshell video admitting or in his opinion that the only reason he got subpoenaed by the DOJ was because the Fed uh was asked by the president to lower interest rates and they did not comply. And so he's basically admitting that there was political pressure to lower the interest rate. How far will this political pressure go even despite the data warning us that inflation will go higher? Data. Yes. Well, I don't think that the pressure on the Fed will go away. I mean, this is actually nothing new. Since the Federal Reserve system was put into place more than a 100red years ago, there was always resistance. Um certainly in the middle of last century, the Fed was given much more independence. um because we've seen that movie before in other countries where uh central banks did not have independence and they were pressured by politics. Um so what we're seeing now is not a new phenomenon but it is quite surprising and I have a feeling that uh policy makers monetary policy makers will continue to look at the Fed as solely focusing on monetary policy and that fiscal policy stays in its fiscal policy space and that they're going to continue to watch the economy the economic data that are coming out and make the decisions based upon that not on any short-term political desires or whim. Well, we have the CME Fed watch tool uh basically telling us that there's not going to be any sort of movement in the Fed funds rate at the next meeting which is going to be two weeks from well 12 days from now exactly. Um and then further out in the year uh the probability gets a little bit higher but not by much. Uh how many rate cuts can we expect realistically this year? Dana, >> we've priced in one in March and that would be 25 basis points and then another in June and I think that's probably going to be it. um two more or potentially even zero. It really depends on where inflation goes and if the labor market continues to hold up. Um but if the labor market starts to deteriorate materially where you see hours falling, also lots of people being let go and key industries that we know are haven't already been consolidating, then I think that's going to disturb the Fed and they probably would go ahead and cut at least twice. But if we don't see that acting, the Fed's probably they may even say we're here, we're at neutral. They already said that they were very close to neutral. >> Well, this is the leading e economic indicator, the lei that the conference board publishes. Uh these red horizontal lines are recession signals and they've been triggered a couple of times now just in the last couple couple of years. Specifically, 2024 was the most recent episode. 2025 as well. Why hasn't there been an official Enber designated recession then Dana? >> Sure. I think there are two factors here. Number one is the the components of the leading economic indicator and it it works for the components that we've asked it to look at. So basically it did capture the slump in manufacturing also the housing uh weakness. It also, you know, looks at the labor market, but it's looking at changes in the leading economic indicator. And so even if the change is coming from a low base, it still picks it up as something negative. Um, and also consumer and CEO confidence um over the last few years has been weak um even though we never went into a recession. So that's the first thing. There are other areas of the economy that have done quite well like services were very strong and also when we look at the labor market other labor market measures most people are working and we reached maximum employment according to the Fed late last year and so I don't think we're very far away from it and so as long as consumers are working they have incomes um and they feel generally good they will continue to spend. Um but again we did have big shocks in 2025 in terms of changes in taxes as well as uh changes in government spending for consumers and the tariffs which do feed through to inflation. Um but nonetheless um the data we have uh so far which isn't much is that yes consumer spending has slowed a bit but consumers are still getting out there. >> Before we continue with the video, let's talk about today's sponsor, Delete Me. Most New Year's resolutions fail because they require constant effort. But protecting your online privacy doesn't have to. 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Is it true that we actually have a K-shaped economy? is that what you're observing? >> There's always a K-shaped economy, even during the Sure. >> During even during the great financial crisis and during the pandemic, um you always have uh you know, a subset of the population who have more wealth um or just more income and they're going to continue to spend. They're just less conspicuous about it. They'll, you know, not get a logo bag. They'll just get a plain white bag or they go to Bloomies, they just get the large bag. Um, consumers who are not as wealthy are definitely still spending. They're just changing. They're just shifting what they're spending on. They're having to prioritize goods and services that they need like food, housing, utilities. Those are the things that they need. Um, and when they do engage in spending on things that are quite discretionary, they will choose the cheaper option. For example, our consumer confidence survey consistently shows that people will go out to restaurants and they'll stream, but they won't, but the types of restaurants they're going to are cheaper and they'll stream TV instead of taking the whole family to the movies, which costs more. So, consumers are changing their behavior. And you also are seeing people who are just buying fewer things. If they don't need it right now and they don't want to finance it with buy now, pay later or credit cards, then they just kind of pull back. >> Let's talk about the CEO CEO survey now. Uh Dana, and before we get into the results, maybe walk us through the history of the survey first and ultimately uh why looking at CEOs and what they think is important when analyzing the economy and then we'll talk about the results themselves. Yes, our seauite outlook survey is something that we've been doing for 27 years now where we canvas CEOs and other members of the seauite plus board members across the globe and certainly we do deep dives in the US, Europe and also Asia including China uh Japan Azion and Australia and so what we've seen uh at least for this year we just released our survey is that uncertainty is kind of the word for the Um CEOs all over the world are very uncertain about a number of things. Uh geopolitics, policy, regulation in the in the markets that they operate in even structural shifts like fewer people uh working uh because people are aging out and also the biggest thing that many CEOs are focused on they say the biggest shift is AI that is a major structural shift. They say it's disruptive. They say it's disruptive in a negative way, but they also see AI as a solution to a lot of their problems. And indeed, they are changing their business models to enable their people and their operations to become more technologically savvy and also um incorporating new technologies like AI to overcome the uncertainty. The uncertainty last year was sur was mostly surrounding the trade uh deals that uh the US had made with the world. Tariff uncertainty CEOs were uncertain as to uh how they could expand their business if uh import duties were to be raised and uh and they were uncertain as to whether or not these tariffs would be um persistent other than rather than transitory as POW might say. But uh Dana, what about this year? What are the top causes for uncertainty this year? Is it still tariffs or something else? >> Yes, indeed. Um uncertainty was number one for economic uh issues, but second to that was definitely tariffs. Um also economic recession and downturns especially among European and Asian CEOs. Um so also just uncertainty about governance. um with uh the greening of the global economy, multinational firms have to be focused on sustainability more in certain regions than others. They're also very uh concerned about politics internally in the markets that they operate in. And uh moreover, they're very uncertain about how AI is going to impact their businesses. Many of them are trying to get ahead of the curve. and and and interestingly the most important human capital issue was how do we what effects will AI have on our people and how do we prepare them for the next digital age >> I guess you'll find out in the next uh next survey that you do uh but geopolitical uncertainty has that ever popped up in the last year uh and especially this year after what happened with Venezuela uh talks with disbanding NATO um has that affected seale decision making it all. Dana, >> yes. And um we actually did ask a question about geopolitics and what what rose uh to the top was not necessarily conflict like kinetic conflicts but certainly uh political polarization um also shifting dynamics in terms of regulation. And there's also and when we did ask about regional issues, Asia was very much concerned about um well I would say Japan was very much concerned about uh a confilration with China. Um other Asian economies were more concerned about the Middle East because many of them are purchasing oil from the Middle East. And in uh North America um a lot of it was a big I'm sorry in Western Europe it was about Eastern Europe. So with the US it was less about conflict. But again this survey was done uh you know a little bit before the US uh and Venezuela situation occurred. And I would imagine that if we ask today um US and North America CEOs, they might actually raise uh conflict in Latin America or or Central America or even in uh you know the Arctic as a concern. And the reason why is because it impacts supply chains. Um you could potentially have have to move your ships around conflicts that are going on in the waters. And it also impacts your labor force. not only if you have laborers and operations close to these areas but also psychologically and indeed one thing that was surprising is that CEOs are prioritizing mental health as a focus uh to invest in um not only for uh understanding their customers but also for their workers. >> Mental health for their their workers not for themselves. >> Correct. mental health for the workers and also as a societal issue which also means their customers kind of understanding the zeitgeist and how they can help not only their customers but also their workers uh make sense of everything that's going on and stay focused and productive amid these existential things. >> Well, I'm curious how this uncertainty translates to hiring specifically. So, we've got CEOs uncertain about uncertainty and also the second issue tariffs that you brought up here in the uh uh article from the conference board sites. Uh they're also uncertain about the ROI of AI spending which I'll touch on in just a bit. So, what does this mean for employment overall data? Well, we did ask them what are you going to invest in or what are you going to do to promote uh uh higher profits and also regarding human capital, what are you going to be doing? And you know, cutting workers was not high on the list. It was more so investing in our workers. Again, um you have these technological changes. um it's much more tangible and customers whether they be business B2B or B TOC are using more technology it's part of their lives and so businesses are focused on making sure that all their operations are using technology to optimize what they're doing but also to maximize the capabilities of their workers to ensure that their workers are ready for this next digital age and that they can accommodate the customers who are demanding things quickly and they want the convenience of things being digital or online. >> Did CEOs answer any questions about wages and whether or not they're going to raise keep wages the same or lower wages this year? >> Well, we didn't ask that in our seed outlook survey, but we have asked that in our quarterly US survey of CEOs and for the most part they are still raising wages, but not as aggressively as they had been. So I think that's a function of labor shortages. Indeed, many industries need workers. So that includes the financial sector um needing high-end workers as well as the construction se sector uh health care um all these sectors and along all the different types of occupations. We don't have enough people who are skilled and that's the other thing even in the industries that can tap into a lot of people. The question is do they have the right skill set and companies are actually looking to bring on people who are unskilled and actually train them in the areas that they need them to be because they're just that desperate for workers. >> And let's talk about AI investments. So that this is a bit of a little little bit of a in my opinion kind of a contradiction here with what what they think and what they're doing. So uh according to your survey their concern exceeds uh yeah their the conference board service found CEOs worldwide struggling to pin down AI's business value. 33% of CEOs globally say their top AI priority is measuring the their ROI. Another article here from the Boston Consulting Group says that four out of five CEOs are more optimistic about the ROI of their AI investments than they were a year ago. I don't know if they're asking different CEOs, but um it certainly looks like C uh AI capex is on the rise even if executives claim they are concerned about ROI, return on investment. So how do you reconcile this kind of you know difference here? >> Yes, absolutely. Over the last three years, we have asked CEOs all over the world and especially in the US about AI and uh they they see great things for AI. They really and many of them even think it's going to increase the bottom line. But the issue is not that they don't want to use AI or they're afraid of it. They just don't know how to measure if it's working. And that's the tough part. Uh it's intangible. Um and certainly I mean you can count hours of how long it takes uh your workers to do something. For example, um we've been able to uh expedite how we sort through tons of data um or even text using AI. Um we do write our own stuff of course but uh that's but still no one's sitting there counting right how many hours did we save. All we can say is well you know last year we did the same thing it took us 2 weeks and then we utilized AI put all of our content in it asked it to sort it out and it did it in a minute right but again that's difficult to quantify but nonetheless um again CEOs do think that AI is something that is is disruptive but they also see it as a good thing. In fact, we always ask we always ask about supply chains and three years in a row, the answer has been we are going to use AI to operize our supply chains. It continues to be number one. Um they're also looking at using AI in marketing, not just to ideulate things for marketing and communications, but to use AI as a tool. Um they also are looking at productivity and like I said they want to train their employees to use AI. Um whether it's uh to help better service their customers or to increase their ability to code things whatever it is um they are looking at AI as a as a savior and also um a way to really enhance what they're already doing. >> This is the uh St. Fed uh M2 money supply and I've shown this chart on a uh annual percentage change basis. So it's growing at the well according to the latest data that came out in November it uh it's growing at 4.2%. So it is on the rise data. Have you noticed in the past a correlation between uh the growth of the M2 money supply versus capex spending from companies? Are they related do you think? >> Um I don't think so because most companies aren't buying and doing things in cash. they're usually going to the market to get to get capital. >> Um and so >> and capital is is private essentially but also over the last few years capital at least in the US and and even um in places like China has come from the government in terms of industrial policies and also deregulation. So I'm not sure it's so much uh the supply of money but the access to credit. Well, how would you how would you rate the access to credit this year versus last, especially given a more dovish Fed? We we think is going to be a more dovish Fed. >> For companies, it really depends on what type of company you are and what industry you're in. Um because that'll determine whether or not you're going to be lent any credit. Also, uh it all it depends on what exactly you're investing in. And certainly with the Fed lowering interest rates, that does help with the cost of capital. That's quite material, I would say, for smaller businesses who are more likely using credit cards um to finance uh their operations and their investments. But larger firms, you know, again, they're going to go to private capital. Um and again, it's whether or not you're in a hot industry or not. and and oftent times that capital um may not be benchmarked off of the Fed funds rate or you know stacked up from the Fed funds rate but reflect what's going on in longerdated Treasury yields and we know that Treasury yields have been high and elevated. Um and certainly we saw various girrations last year and we're seeing it again this year. But in general, uh going forward, Treasury yields are just going to be higher because we continue to have outsized debt in the US and we continue to spend um and cut taxes and those all contribute to further debt going along and and investors so far they're still keen to purchase US treasuries um because there's there limited options elsewhere. But every time we have some kind of conflration in terms of a shutdown or butdding up against the the debt ceiling, investors lose confidence and that drives up treasury yields and that impacts corporate debt um or at least the yields at which uh corporate corporations are going to have to face when they get funding. >> Well, speaking of confidence, this is the consumer confidence index that the conference board has put out. uh any relationship here between the confidence index of the consumer versus the confidence index or the confidence level overall of the uh seale executive first of all. >> Yes. For the most part they're they're consistent in terms of falling over the last year. Yeah. >> And also just being concerned not only about current conditions but the future. Um the interesting thing about businesses or CEOs of large firms is that for most of most of the time they will say okay the economy is looking soft we're concerned about it but then when you ask them about their own industries they're like oh well we're fine but we saw a shift in that confidence level and where they were less less optimistic about their own industries going forward. Um and amid that they are just kind of remaining on the sidelines. They're not looking to really hire people. Um again, labor shortages and finding the right person skills um is preventing them from letting go people um just kind of sticking with what they have. And also when it comes to investments, if they already plan to invest in something in the past, they're just going the course. But there's no indication that they're going to invest more or and then there was some indication that they're going to invest less. >> So I how much ultimately how much of these indices actually become a self-fulfilling prophecy? So in the case of the consumer for example, if they're less confident, does that actually mean in a couple months they will spend less or travel less, whatever the case may be? And for the case of uh in the case of the CEO, if they're less confident in their own sector, how much of that means they're actually going to hire less, spend less, and perhaps even perform worse than they were when they were feeling more confident before? >> Sure. Let's first start with the consumer. >> Consumers can feel one way and do something else. And so even though consumer confidence has continued to flag and within the details, they're complaining about prices and taxes and they're also saying that we're switching to buying things that we need, not things that we want. They're still buying things. They're still spending because they're employed. And I think that's why we didn't go into recession over the last few years because even though prices are rising aggressively and after those big price increases, those changes, the level of prices are high, they still have income and because they're working. And so as long as consumers have jobs, they may complain, but they will continue to consume even if the the composition of spending changes. And looking at businesses again, many businesses have the capacity to invest. They just don't want to make big investments that they haven't already planned because of the uncertainty. They don't know what's coming down the pipeline. Many of them were waiting for massive amounts of deregula deregulation. That just doesn't happen yet. And even still, even those companies uh those industries like tech and finance who did experience deregulation now they're also getting signals um from the administration that they need to participate in making the US more affordable. So it's like, you know, there's this give and take. And so I think as long as businesses don't really know what the path looks like or and there's also this regulatory and policy uncertainty, they're going to hold back unless they just feel adamant about making big investments. But again, I mentioned that CEOs are changing their business models. And those changes might be um pulling back on something or holding off on something or charging forth with something else that is less dependent upon external factors like geopolitics or policies within uh the US itself. >> So third quarter 2025 GDP grew at a 4.3 annual uh annualized rate. Uh let's just finish off on your economic growth outlook. What is the conference board projecting for economic growth GDP growth this year? So yes, we've actually upgraded our GDP outlook a little bit for the United States for 2025 and 2026. Um the upgrades to 2026 mainly focused on the very strong Q3 data. Now consumer spending was stronger and better than we expected. So potentially um the BEA received additional data after uh the monthly reports. Um but there was also still some questions about how imports and exports and also inventories behaved that ended up really boosting the number and we still need more data and there probably will be revisions. Um but nonetheless that was really the main change um for 2025. Now we also upgraded 2026. We think we're going to grow around 2.1%. That's a little bit slower than 2025, but again, I think a lot of that's going to reflect faster growth later in the year. Um, as some of the uncertainties around tariffs are are are addressed. And also, as we see inflation, it's probably going to rise a little bit in the first half, but then kind of cool off later on. And plus, we anticipate that businesses will, you know, start investing again, certainly as many of the uncertainties that we've already talked about kind of fade. >> Yeah. All right. Finally, God, Dana, I'm just um on a more personal note, curious how one can become chief economist at a firm like the Conference Board. So for the younger people watching out there who are picking career paths who are interested in economics, tell us about I don't know if there's a standard or a recommended um path from college all the way to first second job and then eventually moving on to senior economist positions. Uh what does that look like in 2026? >> Sure. I still think there's plenty of room for economists um and especially young ones who um can learn from the older ones who've lived through a few cycles. Uh but certainly I I think certainly getting experience in different areas is important. So I started out at the Federal Reserve Board. So that's you know the central bank uh quasi governmental and then I worked on Wall Street for many many years. So, I got that private sector uh client face-to-face type of experience and then uh I was invited to become the chief economist at the conference board and I think you know having the background with being in the mix of monetary policy but also interacting with very senior people at companies with tons of money um helped me to kind of be that person who can come into the conference board and not only have the perspective of Wall but also to have a perspective of what's really important for CEOs of very large companies, multinationals and also their seauite. >> Does it really matter what u what students study in in university to prepare? I mean is it is it more of a math or STEM focus or economics focus that uh employers care about these days? So absolutely you need the theory but you also need technical experience because so coding so computer science is very important and also I think hands-on experience certainly um interning at an economic shop or or even in a strategy shop where you can learn how to watch the data, how to monitor economies, what to look for, what to expect in order to have that instinct because it's not all about numbers and models. It's also about judgment and having that good judgment takes time to hone, but it's so exciting when you have that. >> All right. Excellent. Thanks so much, Dana. And uh we'll catch up next time. Appreciate your insights and your updates for us. Where can we follow you and your work? >> Absolutely. tcb.org. >> Okay. We'll put the link down below. So, make sure to follow the conference board there. Appreciate it once again, Dana. Take care for now. >> Thank you. >> Thank you for watching. Don't forget to like, subscribe.