Fed's Alberto Musalem Talks US Economy, Labor
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Welcome to Open Interest on Bloomberg TV and Bloomberg Intelligence on Bloomberg Radio. To our viewers and listeners around the world, I'm Michael McKee, international economics and policy correspondent. And joining me this morning is Alberto Mussolini. He is the president of the St. Louis Fed. Thank you for coming. coming in this morning here in Washington. And we have some news in Washington that we may be getting close to the end of the shutdown, which would release data. But just in case that doesn't happen, based on what you know now, what do you think about the economy?
Mike, good morning. Great to be here. I see an economy that has been pretty resilient, where growth has been roughly around potential, around 1.8 for this year, in spite of a lot of uncertainty. I see a labor market that has been around full employment, is around full employment, has been cooling. Demand and supply have been cooling. And I see inflation, which has been closer to the 3% level than to our 2% target.
Well, we know that when the data comes out, everybody will be parsing it carefully, but is it going to add a lot to your knowledge of where the economy is and possibly change any decision you might make?
More data is better than less data, so we will learn. It always has additional value. I do feel that we have a pretty good sense of where the economy is. We have availed ourselves during this period of... unofficial data dearth, let's call it that, with private sector data. We have been in close contact with all of our constituents, businesses, households, community leaders in our district. So I feel we have a pretty good sense of the economy. But I'm very much looking forward to seeing the official data releases because they are the gold standard, and they'll provide additional information. Well, what are companies in your district telling you? You know, they are saying that consumption has been resilient.
They're saying that growth has been fine. They're saying the labor market has softened a little bit. They see many more applicants per vacancy. They report compensation growth somewhere between 3.5% to 4%. So things look reasonably okay.
But the consumption that remains resilient, obviously at the upper ends you have the stock market wealth effect driving it. But I know you've been worried about the lower deciles because they're taking on more debt.
That's exactly what's happening. So we estimate that the real consumption growth... of the high-income folks and of the low-income folks hasn't been about the same. But, as you said, the higher-income households are consuming from the wealth effects they have in the stock market and home prices, by the way. Lower-income folks are taking on more debt. They're taking on more credit card debt. And that's how the economy has been thus far.
Well, taking on debt to continue consumption, a cynical economist might say, where have we heard that before? And how did that turn out? Are you worried that we're setting up for a problem?
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