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The Hidden Inflation Story Inside the Jobs Report · The Financial Exchange Show

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Speaker 2: Good morning, Happy Thursday, Welcome back to the Financial Exchange.
1:14
Speaker 2: It's continuing to be a busy economic data week here.
1:18
Speaker 2: Earning side, we don't have anything to too exciting. McDonald's,
1:23
Speaker 2: T mobile, Shopify all went yesterday today only only big
1:28
Speaker 2: you know, applied materials. Anheuser Busch would probably be the
1:32
Speaker 2: most household name reporting earnings today. But the economic data
1:37
Speaker 2: has been big this week. Instead of a Friday jobs
1:39
Speaker 2: report last week, we got a Wednesday jobs report yesterday.
1:43
Speaker 2: We will get an inflation report on the consumer price
1:45
Speaker 2: index tomorrow if I'm not mistaken. Mark, and a lot
1:50
Speaker 2: to digest here, because frankly, a better than anticipated unemployment report,
1:54
Speaker 2: as we had been hinting might come over the course
1:58
Speaker 2: of the last few few weeks. I'll tutor on Horn
2:01
Speaker 2: for a moment here. There were some signs in the
2:03
Speaker 2: weekly data that we took as positive indicators and turned
2:07
Speaker 2: out to be for the month of January, but wanted
2:10
Speaker 2: to dive in a little bit more now that we've
2:12
Speaker 2: had a day to digest the jobs data, and a
2:15
Speaker 2: lot's being made about the health care sector, and to
2:20
Speaker 2: be clear about why, it's because that's where a lot
2:22
Speaker 2: of the hiring is coming from. And the way that
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Speaker 2: I read a few of these pieces Mark this morning
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Speaker 2: was kind of pooh poohing the you know, the idea
2:32
Speaker 2: that the economy or the labor market is in good shape,
2:34
Speaker 2: and oh, look at what it looks like if you
2:36
Speaker 2: just take out all the health and private education workers
2:40
Speaker 2: to job growth. And I think, what, I know what
2:42
Speaker 2: your answer would be, But that's kind of a false
2:45
Speaker 2: premise in my mind, like I don't really care where
2:47
Speaker 2: the jobs come from. I don't really care where the
2:50
Speaker 2: jobs come from.
2:51
Speaker 3: Right, Well, you can't say if you just took those out,
2:55
Speaker 3: because something would have happened in its place. And secondly, right.
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Speaker 2: So, what we did see is a lot of healthcare
3:04
Speaker 2: workers getting hired again in January. And what I found
3:09
Speaker 2: interesting is if you take a look at the change
3:11
Speaker 2: in non farm payrolls, and they did try and make
3:14
Speaker 2: a chart here that explains how important this was. The
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Speaker 2: total change in non farm payrolls over the course of
3:21
Speaker 2: twenty twenty five was pretty muted at around three hundred
3:25
Speaker 2: thousand jobs created over that twelve month time period. If
3:30
Speaker 2: you do strip out that health in private education, then
3:33
Speaker 2: you had net job loss. So if you don't work
3:35
Speaker 2: in those two sectors, and it feels like a week
3:38
Speaker 2: jobs market it is. Yeah, I can see why you
3:41
Speaker 2: feel that way. But again, if you're using the unemployment
3:44
Speaker 2: report for what I think it's most useful for, which
3:46
Speaker 2: is describing tightness in the economy, that's where That's where
3:52
Speaker 2: this matters. Yes, because I believe I could be wrong,
3:55
Speaker 2: But nurses do spend money, right, They don't just take
3:58
Speaker 2: their wages and go home and sit there. If I'm
4:01
Speaker 2: not mistaken. Sure what other takeaways that you have every years?
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Speaker 3: Yes, nurses are people.
4:08
Speaker 2: And they do spend their money that they take. What
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Speaker 2: other takeaways you have from this week's jobs report?
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Speaker 3: Mark, you made the key point. We talked about it
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Speaker 3: a lot internally this morning. Uh. Researchers you whose economic
4:24
Speaker 3: data differently, they see the world differently. Maybe is a
4:28
Speaker 3: is a more general way to put it than other people,
4:30
Speaker 3: even full time finance people. Data means something only in
4:35
Speaker 3: the context of a framework for thinking about the economy.
4:39
Speaker 3: You don't just look at your blood pressure, well, lay
4:42
Speaker 3: people do. I do, But a doctor takes that as
4:45
Speaker 3: one data point in a much bigger sort of constellation
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Speaker 3: that forms a picture of your cardiovascular health, for example.
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Speaker 3: Similarly unemployment. You might think unemployment going up is unambiguously bad,
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Speaker 3: and in many cases that's true. But if the FED
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Speaker 3: is trying to squash inflation by constricting demand, a side
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Speaker 3: effect of that might be unemployment going up, So it
5:11
Speaker 3: may not be unambiguously bad, is my point. Yesterday's unemployment
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Speaker 3: report was good. Is it unambiguously good? I don't know
5:20
Speaker 3: the end? That sounds crazy? What are you as sadist?
5:22
Speaker 3: What do you want more unemployment?
5:24
Speaker 1: No?
5:24
Speaker 3: But if unemployment is unnaturally load to begin with, I
5:28
Speaker 3: don't think we're too far into the danger zone there,
5:31
Speaker 3: but we might be. It depends on the structure of
5:34
Speaker 3: the economy. The FED might be overstimulating it. That might
5:37
Speaker 3: also sound crazy because the FED is cutting, and many
5:40
Speaker 3: anticipate more cutting, more easing of monetary policy, stoking demand
5:45
Speaker 3: to stimulate the economy. The problem we had in the
5:48
Speaker 3: nineteen seventies was the FED didn't understand the structure of
5:51
Speaker 3: the economy. It overstimulated, and then you had a couple
5:54
Speaker 3: of big oil price spikes seventy three seventy four and
5:56
Speaker 3: seventy nine eighty or seventy eight seventy nine. Then there
5:59
Speaker 3: was the revolution I ran in nineteen eighty seventy nine eighty,
6:06
Speaker 3: So there were some one offs, but the level of
6:09
Speaker 3: underlying inflation, which we sometimes measure by core or similar metrics,
6:14
Speaker 3: was elevated because the Fed thought the economy could run
6:17
Speaker 3: faster than it was running. And looking at yesterday's unemployment report,
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Speaker 3: Mike in the last couple of quarters of GDP the
6:25
Speaker 3: expected GDP, which is our way of measuring economic growth.
6:29
Speaker 3: It's not perfect, of course, but it gives us a
6:32
Speaker 3: good read on what we think is important. There's an
6:35
Speaker 3: argument that the economies running too hot. Indeed, as Chucksata
6:39
Speaker 3: pointed out yesterday, the Trump administration wants the economy to
6:42
Speaker 3: run hot, right, I mean it seems likection year at
6:45
Speaker 3: not uncommon for politicians. So my big takeaway is I
6:49
Speaker 3: wonder if the risks have shifted to inflation relative to unemployment.
6:55
Speaker 2: I think there's some evidence there. Again, we are not
6:58
Speaker 2: in a hot I don't think we can describe today
7:00
Speaker 2: as a high inflation environment, at least not the last
7:02
Speaker 2: twelve months. Right, We're sitting where would you describe inflation
7:06
Speaker 2: Somewhere between night twos.
7:08
Speaker 3: I think if you look at measures of core that
7:10
Speaker 3: tend to line up well with future inflation.
7:12
Speaker 2: Which is uncomfortable but not someone is that a good
7:16
Speaker 2: sober way to Yeah, somewhat elevated. And so it all
7:19
Speaker 2: plays into then what everyone thinks the FED might do
7:23
Speaker 2: and to be you know, to put the odds out
7:26
Speaker 2: there for a moment. A week ago before all these reports,
7:29
Speaker 2: you had investors reacting a little bit to the downward
7:34
Speaker 2: trend in markets from some of the AI stuff, and
7:37
Speaker 2: I think it had some of them thinking, oh, maybe,
7:39
Speaker 2: you know, maybe we're heading for a market downturn and
7:41
Speaker 2: that would justify a FED pivot. Here there was a
7:44
Speaker 2: one in four chance that the FED would cut rates
7:46
Speaker 2: at that next meeting on March eighteenth. Lo and behold
7:49
Speaker 2: a week later, now that we've gotten this Job's report,
7:51
Speaker 2: the likelihood of a rate cut at that next meeting
7:54
Speaker 2: is now sitting below six percent. Basically, nobody thinking that
7:57
Speaker 2: they're going to be able to cut rates when you
7:59
Speaker 2: just saw the un deployment rate dropping. And I have
8:01
Speaker 2: to agree there's no possible way you do.
8:03
Speaker 3: So I'll say what I said yesterday. It's a little dramatic,
8:07
Speaker 3: but this is radio and you don't want to be
8:08
Speaker 3: a boring researcher cut rates, are you nuts? Unemployment is
8:14
Speaker 3: way below what for decades most people thought was a
8:18
Speaker 3: sustainable natural rate of non inflationary right now, the structure
8:22
Speaker 3: of the economy changes, the natural rate changes, but you
8:25
Speaker 3: cannot get away from that trade off between in the
8:28
Speaker 3: short term, between unemployment and inflation. We ignore it at
8:33
Speaker 3: our peril. It was ignored despite the fact that our
8:37
Speaker 3: tools for measuring the potential of the economy and our
8:40
Speaker 3: framework for thinking about it are better than they were
8:43
Speaker 3: in the nineteen seventies. Notwithstanding that that trade off was ignored,
8:47
Speaker 3: people wanted to run Nixon wanted to run the economy hot,
8:50
Speaker 3: and then the Fed underestimated the speed limit associated with
8:55
Speaker 3: the economy. You've got politicians now that want to run
8:57
Speaker 3: the economy hot again. Moreover, they want to actually take
9:00
Speaker 3: over monetary policy and keep lowering rates. This is setting.
9:04
Speaker 3: I'm not making a prediction here, because I'm not. We're
9:08
Speaker 3: not in that business, and it's not a fruitful business
9:10
Speaker 3: to be in. But if if you'd ask me to
9:13
Speaker 3: or any economists never mind, like a sort of a
9:16
Speaker 3: generalist financial economists, last researcher like me, like an academic
9:20
Speaker 3: monetary person, really high powered. Give me conditions under which
9:23
Speaker 3: you would expect inflation to explode and for it to
9:25
Speaker 3: take a long time to get it under control. You'd say, well,
9:28
Speaker 3: loose fiscal policy. MIC, you'd say, loose monetary policy. You'd say,
9:31
Speaker 3: so called fiscal dominance and political dominance of the monetary process.
9:35
Speaker 3: Can you think of of a combination of factors that's
9:38
Speaker 3: more likely to lead to an explosion inflation and inflation
9:41
Speaker 3: than we're walking into right now? Like, if you had
9:43
Speaker 3: to set up your case for really bad, like describe
9:48
Speaker 3: really bad monetary policy, it would look a lot like
9:51
Speaker 3: what we're doing.
9:52
Speaker 2: Let's take a quick break. When we come back, I
9:54
Speaker 2: want to shift back to the jobs report, and specifically
9:56
Speaker 2: the healthcare piece of it. I found that particularly interesting
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Speaker 2: and contextualizing perhaps why we've seen such a dramatic growth
10:04
Speaker 2: in healthcare workers over the course of the last decade.
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Speaker 2: That's next on The Financial Exchange.
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Speaker 2: So one thing from all this employment data is abundantly clear.
11:03
Speaker 2: The number of people working in the healthcare and social
11:08
Speaker 2: assistance which you know, home health AIDS, things along those
11:12
Speaker 2: lines would fall into this category has grown tremendously and
11:15
Speaker 2: I think is outside of a really revolutionary change in robotics,
11:19
Speaker 2: is going to continue to do so. Today the total
11:24
Speaker 2: employees in healthcare and social assistance is about twenty six
11:28
Speaker 2: percent higher than it was a decade ago. So we
11:30
Speaker 2: saw these numbers drop during COVID as we did, you know,
11:33
Speaker 2: employment everywhere, people dropping out of the workforce there. But
11:36
Speaker 2: it has been on a straight line upwards since then.
11:39
Speaker 2: And if you take a look at you know, population,
11:42
Speaker 2: for example, populations only up like six percent over that
11:46
Speaker 2: time period. And so I'm left scratching my head like, Okay,
11:49
Speaker 2: it's not like our population has grown all that much
11:51
Speaker 2: to necessitate this much new healthcare. But the reality is
11:55
Speaker 2: that our older population is clearly what's driving this. Now.
11:59
Speaker 2: I only have the sixty five plus population going through
12:04
Speaker 2: twenty twenty four with my data here, but the population
12:09
Speaker 2: of the United States that is over sixty five has
12:12
Speaker 2: grown by about twenty grew by about twenty three percent
12:15
Speaker 2: between twenty sixteen and twenty twenty four. So to me,
12:19
Speaker 2: if you want to explain all the increase in health
12:21
Speaker 2: care and social assistance, that is the factor. And I
12:25
Speaker 2: don't I mean the estimates that I have seen for
12:29
Speaker 2: our over sixty five population going to continue to grow
12:34
Speaker 2: in perpetuity, but really rise dramatically through twenty forty. And
12:39
Speaker 2: there's nothing that I see that would indicate to me
12:42
Speaker 2: that this again not that we want a reversal of
12:46
Speaker 2: employees working in healthcare, but it leads me to believe
12:48
Speaker 2: one thing, which is all of these costs that people
12:51
Speaker 2: are afraid of when it comes to end of life care,
12:55
Speaker 2: assisted living, nursing homes, there's only really one directtion that
13:00
Speaker 2: can possibly go, especially if we are restricting immigration as
13:03
Speaker 2: heavily as we are right now.
13:05
Speaker 3: Assuming robots don't substitute for people.
13:09
Speaker 2: That's the question of that, that's the question.
13:10
Speaker 3: I think they probably will chucks the expert here, as
13:13
Speaker 3: you know, but I think go ahead, No.
13:16
Speaker 2: That's the really fascinating question to me is how quickly
13:20
Speaker 2: can robotics replace some of this work because here in
13:23
Speaker 2: New England, for example, if you're not familiar, nursing home
13:27
Speaker 2: average costs in New England are anywhere from twelve to
13:31
Speaker 2: fifteen thousand dollars per month. That's just people cost like,
13:36
Speaker 2: there's not a whole lot more that goes in. Obviously,
13:39
Speaker 2: there's you know, and building costs and real estate is
13:42
Speaker 2: very expensive around here. But you're effectively talking about wages
13:45
Speaker 2: being a large part and that's all.
13:47
Speaker 3: That, and that's anybody who's been in a nursing home
13:49
Speaker 3: knows that's all New Americans.
13:51
Speaker 2: Yes, yes, exact, I mean, like to a person right right,
13:55
Speaker 2: it's low paid, low paid.
13:58
Speaker 3: Where they're happy to do it. Well there, happy to
14:00
Speaker 3: do it. It's a it's a good ent trade of
14:02
Speaker 3: the economy.
14:02
Speaker 2: And by the way, that's you know, that's the average
14:04
Speaker 2: I have seen nursing homes around this area. We're broadcasting
14:07
Speaker 2: from close to Boston in the you know, within the
14:10
Speaker 2: one twenty eight loop, twenty twenty five thousand dollars a
14:13
Speaker 2: month for nursing care in this area. If you want
14:16
Speaker 2: to go to a top of the line place for
14:18
Speaker 2: you know, for grandma, that's not unheard of. And so
14:22
Speaker 2: that to me, yeah, fascinating question. You know, the supply
14:26
Speaker 2: and demand for labor to take those jobs, where will
14:30
Speaker 2: wages need to go Given your point that, hey, that
14:33
Speaker 2: is a heavily immigrant labor workforce that does that work today,
14:37
Speaker 2: if we are restricting that more heavily, do wages need
14:40
Speaker 2: to go up to attract more people into it? The
14:42
Speaker 2: answer is yes. And then ultimately, how quickly can Elon
14:45
Speaker 2: Musk design a robot that can do some of that
14:47
Speaker 2: stuff for you?
14:48
Speaker 3: Yeah, some of these tasks can't be Another point about
14:53
Speaker 3: this is that these productivity is very low in that
14:57
Speaker 3: sector because you can't scale taking care of patients, right, Like,
15:01
Speaker 3: you can't scale what we do for a living in
15:03
Speaker 3: our day job either. You talk to one client at
15:05
Speaker 3: a time, you try to scale it. You do some
15:07
Speaker 3: big zoom calls and stuff, but for the most part,
15:10
Speaker 3: we work in a service so we get it. The
15:12
Speaker 3: bigger story here, and this does have implications for productivity
15:17
Speaker 3: and longer term growth, is the ascendants of services and
15:23
Speaker 3: the dominance of services. That's what we do, Mike, that's healthcare,
15:27
Speaker 3: that's government jobs, though those have been static as a
15:29
Speaker 3: fraction of the population. The bigger story in terms of
15:34
Speaker 3: importance for long term growth and a lot of the
15:36
Speaker 3: things we talk of you guys talk about on the
15:38
Speaker 3: show day to day is the ascendance of services and
15:44
Speaker 3: the growth of services jobs. And again that's a lot
15:46
Speaker 3: of different types of sectors here. As a fraction of
15:49
Speaker 3: overall jobs. In nineteen eighty, for example, and I'll end
15:53
Speaker 3: my point with this, services which have always been dominant,
15:57
Speaker 3: even during World War Two, they were about seventy three
15:59
Speaker 3: percent of all payrolls. Services were in nineteen eighty versus
16:03
Speaker 3: twenty percent from manufacturing. Zipping ahead to today, the number
16:08
Speaker 3: is now eighty six percent versus eight percent, and those.
16:14
Speaker 3: At some point manufacturing jobs will level out. I don't
16:17
Speaker 3: know if it's at six or five or what, but
16:20
Speaker 3: at some point people are not perfectly substitutable for capital
16:23
Speaker 3: like robots. But the long term trend is striking.
16:27
Speaker 2: Nor, by the way, have we seen any increase in
16:29
Speaker 2: that manufacturing work this over the course of life. You know,
16:32
Speaker 2: we now have enough data to look at, hey, has
16:34
Speaker 2: manufacturing employment been affected by tariffs and any positive.
16:37
Speaker 3: No manufacturing chanstories. And the reason for that and this is, look,
16:42
Speaker 3: I hate tariffs, obviously, I really wish we try something else.
16:46
Speaker 3: But the reason for that is kind of interesting. It's
16:49
Speaker 3: that businesses prove purchase most imports. It's not like far
16:54
Speaker 3: and away, it's like sixty some odd percent. It said differently.
16:57
Speaker 3: Businesses are consumers too. So the steel terrafs, for example,
17:00
Speaker 3: from nineteen from twenty eighteen twenty nineteen were widely studied
17:04
Speaker 3: by scholars and the conclusion was for every steel job saved,
17:08
Speaker 3: it costs seventy five jobs in other industries. Industries that
17:13
Speaker 3: buy steel. Auto manufacturers, for example, hate steel tariffs, and
17:17
Speaker 3: you could see why.
17:18
Speaker 2: Yeah, so we have not seen that return. But one
17:22
Speaker 2: thing that is just abundantly clear to me is that
17:25
Speaker 2: healthcare work is going to be an in demand sector
17:28
Speaker 2: and we continue to I continue to hear stories from
17:33
Speaker 2: especially qualified registered nurses, especially those that aren't tied down
17:37
Speaker 2: to a specific area. Man, the money that you can
17:40
Speaker 2: make in that job if you're willing to be a
17:42
Speaker 2: traveling nurse, for example, or even somebody that I know
17:47
Speaker 2: who not a traveling nurse lived in Rhode Island and
17:52
Speaker 2: commuted every day over an hour to Boston to work
17:56
Speaker 2: for one of the major hospitals in Boston. And I
17:59
Speaker 2: do you believe, if I'm not mistaken, that her wages
18:02
Speaker 2: were forty percent higher by commuting from Rhode Island up
18:07
Speaker 2: into Boston rather than working at her local hospital down
18:10
Speaker 2: in Rhode Island. And so it is pretty wild.
18:12
Speaker 3: That's another really interesting subject. The best way to increase
18:15
Speaker 3: your wages, no matter what you do, you're a barber,
18:18
Speaker 3: you're a landscape or whatever, move around wealthier people. Everything
18:21
Speaker 3: goes up. It's a widely studied effect.
18:26
Speaker 2: It is. Markets are in mixed territory here. We've got
18:30
Speaker 2: a lot more to get into tomorrow. We will be
18:33
Speaker 2: getting the inflation report in March. We will have a
18:38
Speaker 2: big Federal Reserve meeting here as J. Powell faces down
18:43
Speaker 2: his last few months in the job. And then just yesterday,
18:47
Speaker 2: President Trump was rebuked over Canada tariffs as some mid
18:52
Speaker 2: term anxiety seems to be growing. Here. We will see
18:55
Speaker 2: if that has any effect on the direction of tariffs
18:58
Speaker 2: and whether or not that can actually unlikely get through
19:01
Speaker 2: the Senate in terms of making any changes. Markets and
19:03
Speaker 2: mixed territory. Dow up thirty, SMP sorry, Dow up one
19:08
Speaker 2: hundred and fifty s and P up eight. Nasdaq down
19:10
Speaker 2: thirty nine. We're gonna take a quick break. Wall Street
19:13
Speaker 2: Watches next.
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19:47
Speaker 4: After yesterday's release of the January job support, markets today
19:51
Speaker 4: are mixed as investors continue to assess the path of
19:54
Speaker 4: interest rates this year as a result of that stronger
19:58
Speaker 4: than expected job support. Right now, the Dow is up
20:00
Speaker 4: about a third of a percent, or one hundred and
20:03
Speaker 4: forty points. SMP five hundred is mostly flat. Edging higher,
20:07
Speaker 4: Nasdaq down about a third of a percent or seventy
20:10
Speaker 4: seven points lower, Russell two thousand edging higher, mostly flat
20:14
Speaker 4: ten Youre treas reeled down four basis points at four
20:16
Speaker 4: point one four to two percent, and Crude oiled down
20:19
Speaker 4: about one percent today, trading just below sixty four dollars
20:23
Speaker 4: a barrel. Shares an app Love and fallen sixteen percent
20:27
Speaker 4: despite the mobile advertising company beating quarterly expectations, as traders
20:32
Speaker 4: are still weary about AI's potential impact on the business. However,
20:36
Speaker 4: app Love and CEO downplayed AI threats to the company. Meanwhile,
20:40
Speaker 4: McDonald's posted stronger than expected growth in same store sales,
20:43
Speaker 4: citing success from its value campaign. During the fourth quarter,
20:47
Speaker 4: US same store sales rose six point eight percent, while
20:50
Speaker 4: globally that same metric climb five point seven percent. Shares
20:54
Speaker 4: in the fast food jiner up one percent, Sticking with
20:57
Speaker 4: the fast food space where Burger King parent company restaurant
21:01
Speaker 4: brands beat on the top and bottom lines, lifted by
21:04
Speaker 4: strong international growth. However, that stock is retreating about six
21:08
Speaker 4: percent Elsewhere, Cisco shares a sinking nearly ten percent, even
21:12
Speaker 4: after the networking equipment company reported higher revenue due to
21:16
Speaker 4: increasing AI hyperscale or demand. Beer maker Aarnheuser Busch in
21:21
Speaker 4: BEV beat fourth quarter earnings in revenue forecast, sending that
21:24
Speaker 4: stock up by four percent, and after today's close, we'll
21:28
Speaker 4: see earnings from applied materials in Vertex Pharmaceuticals. I'm Tucker
21:32
Speaker 4: Silva and that is Wall Street Watch.
21:34
Speaker 2: As part of the financial exchange is continued support of
21:37
Speaker 2: the Disabled American Veterans Department of Massachusetts. We want to
21:40
Speaker 2: let you know about an event happening this morning at
21:43
Speaker 2: the DAVMA headquarters in Gardner. The dav is partnering with
21:47
Speaker 2: Ocean State Job Lot to help our veterans in the
21:49
Speaker 2: housing program here in Massachusetts. Ocean State Job Lot is
21:53
Speaker 2: tying in dav mass with their Operations Sleep Well program
21:58
Speaker 2: and will be donating one hundred jackets, sixty coffee makers
22:01
Speaker 2: with the coffee provided by Boston's Best, Lennon's Betting, and
22:04
Speaker 2: other items to help support the seventy five plus veterans
22:07
Speaker 2: and families in the housing program here in Massachusetts. Operations
22:11
Speaker 2: Sleep Well is a charitable initiative run by Ocean State
22:14
Speaker 2: Job Lot Charitable Foundation. It involves creating and donating sleep
22:18
Speaker 2: kits that help people, especially veterans and individuals transitioning into
22:21
Speaker 2: stable housing, get essential betting and comfort items they need
22:24
Speaker 2: when moving into new or temporary living situations. And I'm
22:28
Speaker 2: excited now to be talking with David Starlitto. He's a
22:31
Speaker 2: long time executive with Ocean State Job Lot and the
22:33
Speaker 2: current executive vice president of Corporate Giving, leading the Ocean
22:37
Speaker 2: State Job Lot Charitable Foundation. In his seventeen years of
22:40
Speaker 2: the company, David has transformed its foundation into one of
22:42
Speaker 2: the country's most active private organizations serving veterans and military families.
22:48
Speaker 2: And David's on his way to the headquarters in Gardner,
22:51
Speaker 2: Massachusetts for a special event today. So David, you know,
22:53
Speaker 2: before we talk about today's event, can you tell us
22:55
Speaker 2: a little bit about Ocean State Job Lot and how
22:59
Speaker 2: they became dedicate so dedicated to helping organizations in need.
23:04
Speaker 5: You know, it's a it's a pretty easy thing, and
23:06
Speaker 5: I'll take a picture for you. The company has always
23:10
Speaker 5: done a lot of work with military families and cerans.
23:13
Speaker 5: I took the reins about seventeen years ago as the foundation,
23:17
Speaker 5: and the question was what are we going to focus on.
23:21
Speaker 5: We were doing a program and I believe it was
23:23
Speaker 5: that joint bas Cape cod out of the Cape and
23:27
Speaker 5: I we were bringing food to a pantry there and
23:30
Speaker 5: we were within eye view of a tarmac, a tarmac
23:35
Speaker 5: that just landed two families at leave. They had come
23:37
Speaker 5: to anchorage, and two women who had three children in
23:42
Speaker 5: tow and two of the children who were in shopping
23:45
Speaker 5: cut the shopping stunt. And I asked the officer who
23:49
Speaker 5: was next to I said, what's this. They said, that's
23:53
Speaker 5: their baby carriage. I said, you're lying. He goes. Now,
23:59
Speaker 5: the people assume that veterans and military families are tended
24:04
Speaker 5: to what we would all hope would be the case.
24:08
Speaker 5: But I learned them a lesson that that's not necessarily true.
24:13
Speaker 5: That many of the individuals that are lying under bridges
24:17
Speaker 5: actually took an oath to protect them, and that became
24:22
Speaker 5: essentially the charter, or a part of the charter of
24:26
Speaker 5: Ocean State John Lawn's Charitable Foundation Military Families and Veterans
24:30
Speaker 5: was taken that, OK, we've taken oaths towards ten. Now
24:33
Speaker 5: it may mean in a housing, It made mean an
24:37
Speaker 5: additional supplemental healthcare, might be service dogs. It might be
24:41
Speaker 5: the coats our program that coke program, which is part
24:46
Speaker 5: of what we're going to be doing today. And gardeners
24:48
Speaker 5: started off to eleven hundred tests in to Hampstid believe
24:53
Speaker 5: that eight years ago, nine years ago, and it'll hit
24:57
Speaker 5: between eighty five and ninety thousand coats between Vane all
25:01
Speaker 5: the way down to Baltimore, Maryland and Delaware where we
25:05
Speaker 5: have our operations.
25:07
Speaker 4: Now.
25:07
Speaker 2: The list now, now, David, I'm going to find this
25:10
Speaker 2: answer obvious, but you know why the Disabled American Veterans Department,
25:14
Speaker 2: How did how did you start and when did you
25:15
Speaker 2: start working with that organization?
25:18
Speaker 5: Well, we don't do it alone. We've I've got one
25:21
Speaker 5: hundred and seventy some odd stores, and we look for
25:25
Speaker 5: organizations that basically have the wherewithal. They have the mix
25:30
Speaker 5: of volunteers and a sturdy administrator structure. They have placements
25:37
Speaker 5: where we need them, and they are able to do
25:39
Speaker 5: distributions when I cannot. The a V is way us
25:45
Speaker 5: at the top of that list. That's why we decided
25:48
Speaker 5: if we could turn to the a V and into Connecticut,
25:51
Speaker 5: in Rhode Island, so forth and so on. It's an
25:53
Speaker 5: organization that can become a backbone of our commitment. That's
25:57
Speaker 5: why the av is a very It's a good partner
26:01
Speaker 5: for us.
26:02
Speaker 2: No doubt. David sar Litto, he is the executive vice
26:06
Speaker 2: president of Corporate Giving, leading the Ocean State Job Lot
26:09
Speaker 2: Charitable Foundation and driving out to Gardner, mass Chusetts right
26:12
Speaker 2: now for their special event today. David, thank you so
26:15
Speaker 2: much for joining us and for your support of the
26:17
Speaker 2: disabled American Veterans Department of Massachusetts.
26:20
Speaker 5: Take care of yourself. Thanks for having me on.
26:22
Speaker 2: You as well. Take care.
26:24
Speaker 4: Uh.
26:25
Speaker 2: President Trump yesterday rebuked over his Canadian tariffs, not going
26:29
Speaker 2: to do anything as this is very unlikely to pass
26:32
Speaker 2: the Senate, but the House voted with six Republicans breaking rank.
26:37
Speaker 2: Republicans Thomas Massey of Kentucky, Don Bacon of Nebraska, Kevin
26:41
Speaker 2: Kyleie of California, Jeff Heard of Colorad Dan Newhouse of
26:44
Speaker 2: Washington State, and Brian Fitzpatrick of Pennsylvania broke with their
26:48
Speaker 2: party to join Democrats in passing the bill. This you
26:52
Speaker 2: know context Obviously, there is the ongoing debate over the
26:57
Speaker 2: bridge connecting Ontario and Detroit, Michigan. There is the the
27:02
Speaker 2: Gourdy Howbridge. Yeah yeah, hockey fans out there. The measures
27:07
Speaker 2: come also as President Trump is privately waight quitting the
27:10
Speaker 2: us MC a trade pack that he really designed and
27:13
Speaker 2: signed during his first administration, and you know, frankly, I
27:18
Speaker 2: think we're going to see more of this more symbolic
27:21
Speaker 2: than anything else type of voting ahead of the midterm elections,
27:24
Speaker 2: as Republicans are pretty nervous clearly about keeping their jobs.
27:29
Speaker 2: In this overall context, especially in some of these swing states,
27:33
Speaker 2: this bill seems from what I've seen, incredibly unlikely to
27:38
Speaker 2: pass the Senate, and even if it did, would likely
27:40
Speaker 2: be receiving a veto by the President himself. But remember
27:44
Speaker 2: the context of all this. I mean, first off, you know,
27:47
Speaker 2: tariff revenue has you know, stored three hundred percent over
27:53
Speaker 2: you know, twenty twenty five. It's a massive now source
27:57
Speaker 2: of revenue out there. It is also so still kind
28:02
Speaker 2: of awaiting a Supreme Court decision that could kill the
28:06
Speaker 2: tariffs by and large across many areas, could force reimbursement
28:10
Speaker 2: of tariffs. Frankly, I'm kind of anxious to see this
28:16
Speaker 2: Supreme Court decision because I keep putting myself in the
28:19
Speaker 2: shoes of any manufacturer or foreign company that exports goods
28:26
Speaker 2: to the United States, and my sense is that all
28:30
Speaker 2: of them are in this holding pattern right now. They're
28:32
Speaker 2: basically saying to themselves, this all looks like some uncertain game,
28:36
Speaker 2: and we don't know where tariffs will actually be in
28:39
Speaker 2: the future, and so I don't think anybody out there
28:42
Speaker 2: in the manufacturing sector is willing to invest any capital
28:44
Speaker 2: right now.
28:45
Speaker 3: That's one cost, and it's very hard to quantify the
28:47
Speaker 3: cost to employment. And as you say investing, though, that
28:50
Speaker 3: doesn't seem to be any shortage of investment from other sectors.
28:53
Speaker 3: Sure hard to say, though, I mean, investment has not
28:56
Speaker 3: been the driver of GDP recently. The certain cost of
28:59
Speaker 3: techs is that which is imposed on the average consumer.
29:02
Speaker 3: Tariffs benefit a small, very small number of producers at
29:06
Speaker 3: the expense of everybody else. But the cost to the
29:12
Speaker 3: rest of us is so small that we don't have
29:15
Speaker 3: any incentive to organize to oppose them. So you have
29:17
Speaker 3: to oppose them on principle, which sounds kind of silly,
29:20
Speaker 3: like don't you want to save that plant? Well, I do,
29:23
Speaker 3: but think about the cost it's at worth. Like every
29:26
Speaker 3: study that's ever been done has has concluded that every
29:32
Speaker 3: job saved from any tariffs, the one off stuff that
29:36
Speaker 3: we did from in Trump won or you know, previous
29:39
Speaker 3: presidents have. There been plenty of examples for study. Job
29:41
Speaker 3: saved costs hundreds of thousands of dollars each, Like you
29:44
Speaker 3: could send every employee of a shuttered plant back to school,
29:48
Speaker 3: his whole family back to school. He could pay for
29:50
Speaker 3: his daughter's wedding. You could buy them a house practically
29:53
Speaker 3: with the money that it costs us on average, which
29:56
Speaker 3: is not much per per person. For these protectionstionist policies,
30:01
Speaker 3: they're just such a bad and inefficient way. We haven't
30:03
Speaker 3: even gotten into the inefficiencies they create in the economy
30:07
Speaker 3: as all.
30:07
Speaker 2: Let's take a quick break when we come back. The
30:10
Speaker 2: median amount American workers have saved for retirement. It's appalling
30:15
Speaker 2: and we'll be covering it next on The Financial Exchange.
30:18
Speaker 1: Miss any of the show. The Financial Exchange Show podcast
30:22
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30:26
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30:29
Speaker 1: the Financial Exchange Radio Network.
30:45
Speaker 2: The National Institute on Retirement Security puts out all sorts
30:49
Speaker 2: of surveys that they do on a regular basis, and
30:51
Speaker 2: they have a new one that indicates we are woefully
30:55
Speaker 2: unprepared for retirement. But there's actually some interesting data in
30:58
Speaker 2: the survey beside the headline, which is that the median
31:03
Speaker 2: savings from their survey they did they did a data
31:07
Speaker 2: panel in twenty twenty three, so it's a couple of
31:09
Speaker 2: years outdated at this point. They surveyed respondents between the
31:15
Speaker 2: ages of twenty one and sixty four who have any
31:20
Speaker 2: personal income, so you had to have income in order
31:23
Speaker 2: to be part of this data. And the median amount
31:27
Speaker 2: that they had saved for retirement among all workers was
31:32
Speaker 2: nine hundred and fifty five dollars, which is not great, Bob.
31:37
Speaker 2: The average was closer to one hundred thousand at ninety
31:39
Speaker 2: three thousand. And the other good signs in here were
31:42
Speaker 2: that participation in retirement plans is actually higher than I
31:46
Speaker 2: would have guessed. Do you I mean, do you have
31:49
Speaker 2: a guess what the participation rate for retirement plans is?
31:52
Speaker 3: I bet since auto enrollment it's seventy.
31:55
Speaker 2: Percent close sixty four percent for the private sector eighty
31:59
Speaker 2: two percent PERI. They don't the key finding, Uh, it's
32:04
Speaker 2: much lower. By the way, if you're self employed, only
32:06
Speaker 2: thirty eight percent of private sector self employed individuals fund
32:12
Speaker 2: retirement accounts, so that it seems to me like a
32:16
Speaker 2: build up why your business. I get why you reinvested
32:19
Speaker 2: into your business. I know you know you might be
32:22
Speaker 2: buying other assets to lower your tax bill. But I
32:25
Speaker 2: think that's a pretty big missed area that people.
32:28
Speaker 3: Well that what they could do if they worked with
32:30
Speaker 3: a professional, and not everybody has the time to do this.
32:33
Speaker 3: You set up a pension fund where the limits are.
32:35
Speaker 2: Huge, ye, and you can sock away a lot of money.
32:38
Speaker 3: Sorry, and cut your tax bill by I'm not given
32:40
Speaker 3: tax advice here, but you a lot of small, even
32:43
Speaker 3: soul props.
32:44
Speaker 2: The other piece that I think people are generally unaware
32:47
Speaker 2: of when it comes to their own businesses is if
32:49
Speaker 2: you tried to look into a four to one K plan,
32:52
Speaker 2: for example, a decade ago, as a small employer with
32:55
Speaker 2: say eight employees, it was really expensive, like very very expensive,
33:01
Speaker 2: even for just like a solo person who had their
33:03
Speaker 2: own thing going. I was speaking to somebody in Maine
33:06
Speaker 2: the other day who again has his own small business
33:08
Speaker 2: for like three employees. He had a four oh one
33:10
Speaker 2: K a decade ago. He closed it because nobody was participating.
33:13
Speaker 2: It was costing him thousands of dollars a year. Now
33:16
Speaker 2: every main resident who has a job, whether they have
33:20
Speaker 2: a four oh one K offered by their employer or not,
33:22
Speaker 2: can participate in a main state employee at four kgree
33:26
Speaker 2: long ado. So the costs for these things have come
33:29
Speaker 2: way down, and that is I think bumping up the participation.
33:33
Speaker 2: The other point that you made that auto enrollment does
33:38
Speaker 2: make it was revolutionary.
33:39
Speaker 3: In two thousand and six, Congress passed a law that
33:41
Speaker 3: said you could do it. Before then, it was unclear
33:43
Speaker 3: plans were bigger plan sponsors with ARISSA is the Employee
33:47
Speaker 3: Retirement Income Security Act. It governs the conduct of tax
33:50
Speaker 3: favored plans like four oh one k's plans were doing it,
33:54
Speaker 3: but you had to have an ARISSA attorney on staff
33:56
Speaker 3: to tell you was okay and then fight the irs
33:58
Speaker 3: when they challenged you on it, or fight acclaim When
34:00
Speaker 3: a participant me and you being participants, people are getting rolled.
34:03
Speaker 3: They say you auto enrolled me, then I lost money.
34:05
Speaker 3: They could sue you. Until Congress carved out a safe
34:10
Speaker 3: harbor for that action. It wasn't clear. Now everybody does it,
34:15
Speaker 3: but it's a scale business, Mike. You know when you
34:17
Speaker 3: price a plan for a big company with fifteen thousand employees,
34:22
Speaker 3: the per head cost is a fraction of what it
34:25
Speaker 3: would cost, say Vanguard or Fidelity or whomever to administer
34:28
Speaker 3: a much smaller plan. So states doing this is a
34:31
Speaker 3: very very good thing because they can exploit the scale.
34:34
Speaker 2: So something like a decade or two ago, that piece
34:37
Speaker 2: was carved out. I don't remember when that was when
34:39
Speaker 2: that was changed, but the auto enrollment feature was passed
34:44
Speaker 2: by Congress.
34:45
Speaker 3: Twenty two thousand and six was PPO That's Your Protection.
34:47
Speaker 2: Act, So two decades ago that was passed. We're on
34:50
Speaker 2: the cusp now of a bunch of new changes when
34:52
Speaker 2: it comes to retirement plans, and I think it's going
34:54
Speaker 2: to make them, unfortunately a little bit more complicated. We're
34:58
Speaker 2: talking about adding annuities to plans. I at equity investments
35:01
Speaker 2: into four one can. Those have been out there for years, Mike,
35:03
Speaker 2: they have, but I think evaluating those on one's own becomes,
35:08
Speaker 2: forget about it, pretty challenging. If you're falling into one
35:11
Speaker 2: of these buckets. Maybe you're self employed and you're trying
35:14
Speaker 2: to figure out, how can I best save for my
35:16
Speaker 2: future other than reinvesting into my business, Or if you're
35:19
Speaker 2: a employee of a company and trying to figure out, Hey,
35:22
Speaker 2: what's the best savings vehicle for my future? Give the
35:25
Speaker 2: folks at Armstrong Advisory Group a call. We work with
35:28
Speaker 2: our clients one on one to evaluate these decisions. The
35:31
Speaker 2: numbers eight hundred three nine three for zero zero one.
35:35
Speaker 2: You can go to Armstrong Advisory dot com find a
35:38
Speaker 2: time for us to call you back. But again that number,
35:40
Speaker 2: if you want to call now, is eight hundred three
35:42
Speaker 2: nine three for zero zero one.
35:44
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
35:46
Speaker 1: registered investment advisor. Nothing in the ad or in any
35:49
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
35:52
Speaker 1: your own financial tax into state planning advisors before making
35:55
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
35:58
Speaker 1: advisory services.
36:00
Speaker 2: Mark, We've got a text on the tariff conversation, and
36:03
Speaker 2: to be fair, I do not think while it may
36:05
Speaker 2: be universally agreed, the tariffs are not great idea. Of
36:07
Speaker 2: course to economists, it's not universally held by the average person.
36:12
Speaker 2: And somebody brought up like why. The question was, if
36:16
Speaker 2: tariffs are such a bad idea, how come so many
36:18
Speaker 2: other countries have it's high tariffs.
36:19
Speaker 3: It's a great question. They may have different reasons for
36:22
Speaker 3: protecting different industries. And in point of fact, most countries
36:24
Speaker 3: don't have high tariffs. Ours are now much higher and
36:28
Speaker 3: second late. And by the way, I'm not saying this
36:30
Speaker 3: like you should know this, because I didn't know it
36:32
Speaker 3: until I sure made some you know, carved out some time,
36:35
Speaker 3: and I have considerable free time to study this type
36:37
Speaker 3: of stuff and piggyback on the work of others. There's
36:40
Speaker 3: no correlation between level of tariffs and trade surplus or deficit.
36:44
Speaker 3: There are countries that try desperately to protect home industries
36:47
Speaker 3: and still run big trade deficits and vice versa. Why
36:50
Speaker 3: is that. It's because trade deficits are the result of
36:53
Speaker 3: not saving enough, and that is also not an obvious
36:57
Speaker 3: result and one that's a little too complicated get into here. Also,
37:01
Speaker 3: most people probably don't care that much, but it's a
37:04
Speaker 3: great point. Different countries protect industries for different reasons. There's
37:08
Speaker 3: no question though, that other consumers not employed in that
37:13
Speaker 3: industry bear the cost of that protection.
37:15
Speaker 2: By the way, my answer would just be just because
37:19
Speaker 2: another country does it doesn't mean it's a good idea. Go.
37:21
Speaker 2: You can verily easily search this at the World Bank
37:24
Speaker 2: and pull up the countries with the highest average effective
37:28
Speaker 2: tariff rate and rank them, and I think what you're
37:30
Speaker 2: gonna find is you don't really want the type of
37:33
Speaker 2: economy that they know now. They're generally being in countries
37:36
Speaker 2: like Bermuda, the Democratic Republic of Congo, and Equatorial Guinea.
37:40
Speaker 2: Quick break. A lot more to cover in the second hour,
37:42
Speaker 2: the financial exchange. We'll be right back