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They begin by discussing the economic outlook, clouded by recession fears dating back to 2023. “Generally speaking, the US economy is still quite robust, surprisingly though, because we're just coming out of a very significant round of tightening by the Fed ,” said Daco. “The economy still growing at about a 3% pace.
And today we are proud to welcome Greg Daco, uh Greg, you are the EY chief economist and we've got a lot of break, a lot of stuff to break down today in the US and global economies.Our phrase of the day is supply side dynamics. It was really interesting because we're getting a read on the consumer right now with earnings season and we'll be able to dig into some of those trends in a minute.It is supply side dynamics and I kind of mentioned the Gipper before which is a tongue in cheek reference to Ronald Reagan.Supply side dynamics is and it refers to the real world factors that are impacting production such as labor availability, technology and regulations.
Industrial policy is another great example of supply side factors influencing how business activity is evolving. Now, now there is that growing focus on sustaining strong supply side dynamics, on the labor side, on the capital side and increasingly on the productivity side, that is the key to sustaining strong growth without inflationary pressures.
Well, I think a model is good in the sense that it helps you frame a discussion, frame a problem and resolve the problem in a quantitative way.Um You know, there's the regular quip of, would you rather have Bob Solo, the Nobel laureate as an advisor or a model? But also consider these novelties, the new normal of supply side factors playing a greater influence.
And the reason why this is a misled approach in the current environment is because you tend to see massive revisions to data. I think that that's the case you were mentioning prior fed presidents and I think the Fed chairs, those prior fed chairs were more forward looking. I think the data point dependency is hurting the fed because it makes the fed extremely reactionary to every development in the economy and it leads markets to not know what the fed is going to do for the next move.
But the big question of course is what happens with the elections and what happens in terms of policy for 2025.But first we need to take a short break, we are back and this episode is brought to you by the number 8.04 million. So you cut your labor force by 10% 20% and you reduce those labor costs by, by the equivalent amount that then ensures that you're essentially as productive, more productive Uh in terms of your capacity to serve your, your your clients at a lower cost.So that led to a self fulfilling mechanism where because of lower labor market growth, you in in turn saw lower consumer spending growth and lower economic activity which fed back into lower investment.
So the top 10% of income earners are still spending relatively freely and increasingly they're carrying much of the consumer spending on their back. Yeah, I think you make a couple of good and important points here in terms of inflation dynamics, I do think there is a structural upside to inflation. Because if you can do more with the same amount of labor, then it's not creating those wage pressures that you typically can be concerned about.And I'm very encouraged by what I'm seeing because it's not all about technology at this point, it's all about business leaders focused on efficient processes and getting the most out of their employees that are now better trained, longer tenured and better able to generate output.
But the second effect is the positive effect across the economy, stronger productivity growth, which is which is disinflationary and stronger supply side dynamics. Savara Announces the Rare Lung Disease, Autoimmune Pulmonary Alveolar Proteinosis , is Highlighted on a New Episode of "The Balancing Act®" Airing on Lifetime® TV
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