00:00 Speaker a
Well, while today’s trade policy and large technologies are dominating the market, we also have to talk about the economic data we got this morning. The first-quarter GDP revision showed that the rate of economic contraction was slightly lower than the 10th seen last month, shrinking by one-tenth. For more information about this, I want to bring my co-host into an hour. We have Standard and P Global Chief Economist Paul Gruenwald of S&P. Also join us in the discussion, we have Julie Beal, chief market strategist and portfolio manager at Kane Anderson Rudnick. Paul, I want to start with an hour-long co-host and I’m glad to have you. Talk to me about how you view the massive amount of economic data we got this morning.
00:49 Paul Gruenwald
Yes, well, let’s start with GDP. As you said, big numbers haven’t changed. Still a little negative. There are two large blocks moving in opposite directions. The first one has to do with the frontline running of tariffs, because remember this story, we attract a lot of imports, and they are already in stock. So we have a little bit of stock, you know, that’s good. Well, but what I want to say is that our revisions to consumption growth are even more serious. Therefore, 1.8 to 1.2 is a big move. 1.8 soft landing zone, 1.2’sa is a little harder. So that’s negative. We will have to wait for future revisions, but I think the harvest is that Q1 looks a little softer than we originally thought.
02:00 Speaker a
Julie, in order to get you into the conversation, Paul’s point of view, seems like this morning’s softness and consumption data may already be in the minds of bond market investors. If we do start to see softening in consumers, what signal does this send you?
02:25 Julie Beal
Yes, I mean, I think a lot of the things we can really attribute to the growth we have enjoyed over the past few years have been the strength of consumers, and it really is related to the health of economic growth we see at work. What makes me a little nervous is that when I look at some economic data, you see more and more people choosing to do the gig economy. I’m worried that this is actually the weakest job in the economy, right? Suddenly, Uber rides aren’t that important. Suddenly, you don’t act much. So if we run into patches with weaknesses in consumer spending, I worry that it will have a duplicate effect on people’s ability to continue looking for income as prices continue to rise.
03:30 Speaker a
Of course, it may have an impact on future earnings growth. Paul, bringing you back here, where are you seeing American consumers today?
03:43 Paul Gruenwald
Yes, well, she made a good point. It is indeed the consumer and labor market. Since the Fed and other central banks began raising interest rates, we have established this truly resilient link to labor demand and consumption. If that is a rupture, we haven’t cracked it yet, but we have some weaknesses. If that starts to break down, I think we’ll fall into a weaker growth state. The labor market is OK today. You know, the ongoing claim requirements raise some claims, but we are far from the panic zone. So if this is a soft landing, this is the original call of the year, we can do it. But, you know, we’re going to have to look at the data, consumer spending and the labor market over the next few months.
04:39 Speaker a
Let’s talk about the labor market, because it seems like it takes longer for people to find a job, and entry-level jobs are becoming increasingly challenging. How much attention are you on this?
04:56 Paul Gruenwald
Well, we saw two things. We don’t see many layoffs, but we don’t see many recruitment either. So, you know, it’s a resignation and a new employee, things get a little softened. It looks like the company is being put on hold. We know that the court’s ruling on Aiipa may have improved last night, but we still have this pending ruling on everything. So that’s actually what we’re looking at, right? If people start to get rid of discretionary spending, this is the first crack you will see, then, you know, what is in that bucket? Is it going out for a meal? Is it a trip? You know, Doordash and other things? Therefore, we will first watch this kind of consumer discretionary information. Essentials may experience any kind of slowdown, but the discretionary thing is really where we start to see the Delta.
