There are two types of data that many in the business world watch. Hard data, which is things like economic releases, and soft data, which may be things like observations by business leaders. In the video above, former Federal Reserve Bank of Dallas president and CEO Robert Kaplan shares what hard and soft data he would be keeping an eye on as concerns about a slowing economy grow.
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Jay Powell talked about that yesterday, Rob. You know, he said, bottom line, he said economy resilient, labor market resilient, underlying inflation good. So what when would you expect that to show up in the hard data?
So there's two things going on. One, the tariffs that we were shocked by on Liberation Day haven't actually gone into effect yet. Uh and so we've seen a lot of pre-ordering and anticipation of them. We've seen businesses trying to figure out how they're going to manage them, big and small businesses. In the one country you see extraordinary highly tariffs on is China and that is having some impact. We see right now on businesses. Um so we're seeing slowing. The thing that also is going on though, the labor force is very tight. Uh unusually tight. Uh and the reason is we've we've reduced immigration flows and organic indigenous flows are very low. So you may actually see, we saw a significant first quarter weakness and we didn't see the unemployment rate spike up. Why is that? I think part of it is businesses are reluctant to get rid of workers unless as long as they're going to stay in business because they know it's going to be difficult to replace them. So I'm watch I'd be watching every employment report. I'd be talking aggressively and to contacts about what they're seeing. But we haven't seen the weakness yet. I can tell you that. And a couple of three sectors, travel, leisure, tourism, obviously, shipping, but apart from that, businesses hanging in there pretty well. And I don't think you're going to see the unemployment rate spike up either. I'm not seeing that either at this point.
So Rob, you watch the data, you watch jobs data in particular, you don't listen to what's coming out of the White House, presumably, if you're a member of the Fed. That said, with the president's rhetoric persisting in terms of him now saying the Fed really needs to cut rates, do you think that at some point J. Powell's going to need to come out and make a more forceful case of why cutting is not appropriate right now?
Yeah, I think I think as this unfolds, particularly if you see more more significant GDP weakness which leads to unemployment spiking up, then yes, he will have to explain more why the ramp up in unemployment isn't enough to justify adjusting rates. The other thing that should be going on here behind the scenes is normally, uh the chairman of the Fed will be talking regularly to the Treasury Secretary. I'm assuming those conversations are going on. They normally would be and I think it's very important that that line of communication is also open.
