Carl Weinberg Talks Supply Chain
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He is magnificent. The essay at High Frequency Economics is a yield-based analysis of the economy. It is what Carl Weinberg did at Lehman Brothers for decades. And he was just thrilled that he could join us here this morning. Carl, I love your research note in that you say the labor market's going to hover, but GDP may be light. Link the two together into the first part of 2026.
Hi, Tom. Good morning. Thanks for having me back on the show. It's been a while. You know, we're at full employment. That's my assessment. Anyhow, others might not agree with that. But even at a four and a half percent unemployment rate, which I think, by the way, is going to go down in this morning's report and we'll get a revision tomorrow. downward to the figure that we saw for November. But when we're at full employment like this, the economy has trouble growing. The only way it can grow is either by immigration or getting more people in the labor force or by increasing productivity. So productivity was really strong in the third quarter. The economy grew well.
but there's no promise that those productivity gains are going to continue into the fourth quarter so gdp growth may be capped if you will by the economy being at full employment right now i i really i'm more focused folks on the soggy gdp outlook of selected economists mr myron wants six rate cuts one and a half percent down down down is that a carl weinberg theme
Absolutely not. I think Myron is wrong. I think he's abusing and misinterpreting the Taylor rule and the estimates and the importance of our star within the Taylor rule. Our star certainly has come down, but potential GDP has also come down, potential GDP growth. So when you put the two together, there's no recommendation from the Taylor rule whatsoever. or anything that I know about economics for the Fed to continue to cut rates with the economy at full employment.
This is Kurt Weinberg and Michael Ferroli at J.P. Morgan. This phrase, potential GDP, none of these people within the Trump administration talk about it. It's like they're blind to it.
Carl, the focus obviously today will be on the labor market, but the other side of the Fed mandate is inflation. What's your inflation view? Are you concerned that we may see stickier inflation than maybe the market's discounting?
I'm concerned about more inflation as 2026 progresses, because if the economy continues to grow, but it can't find the workers to make it grow, then we'll have too much income chasing too few goods, and that will put upward pressure on prices once again. To me, that's what the Fed should be thinking about. To my clients, that's not what the Fed is thinking about, but in my view, that's what the Fed should be thinking about.
So given that backdrop, how do you expect the Fed to behave this year? Is it one cut, two cuts? Do they need to be more aggressive or less aggressive?
I don't know. I mean, that's really a big question. First of all, we have four new voters on the FOMC. We've lost both of the voters who dissented from previous rate cuts. And at least two of the new people coming on board may be more inclined to ease rather than to hold steady, even as soon as the next meeting.
What are the biggest risks facing the supply chain in 2026?
Against that, Fed Chair Powell still commands probably three votes on the FOMC out of the 12. And that's the swing, if you will, between those who will ease and those who will settle. So I don't really know where they're going to go on this. But what I'm hoping to see as we move through the year is a change in the perception that payrolls are slowing because the economy is weak.
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