The Three Forces Deranging the Economy in 2025
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Why does the 2025 economy feel chaotic despite normal macro data?
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Before we begin today, and this is a fun one, this episode discusses some charts. So if you would like to see them as we're discussing them, you can watch the episode on YouTube, or you can find a link to all the charts in the show notes.
I've covered the economy for a long time. I've covered the financial crisis. I covered the pandemic. I cannot remember a stranger and more chaotic year in the economy than this one. A year where it was so unclear what the story was and how it would actually turn out. Other years, the economy is bad. It's good. But what is the economy right now? From the tariffs and Liberation Day and then the deals and the pauses and the carve-outs, what is our tariff policy now? To the giant AI build-out that is keeping the economy afloat. But is that a bubble? Does it herald massive labor market disruption? Is it good for us? Is it bad for us? Good for whom? Bad for whom? to the economic data, which has become completely divorced from how people actually feel about the economy.
If you look at consumer sentiment, people feel like the economy is as bad as it was at the depths of previous recessions. And yet the economic data, the job market, wages, inflation, it kind of looks okay. So there is this divorce between how people feel about the economy and what we can see in the economy. How do you make sense of all this? So now as 2025 comes to an end, I want to do a show wrapping up the strangest year in the economy that I have covered. So I wanted to have on Tracy Alloway and Joe Weisenthal, who are at Bloomberg and co-host the excellent economic podcast, Oddlots, to talk it all through with me. As always, my email, ezraklineshow at nytimes.com.
Tracy Alloway, Joe Weisenthal, welcome to the show.
Thanks so much for having us.
Yeah, thrilled to be here. All right, so we're here almost to the end of 2025. Tracy, let's start with you. How would you just describe how the economy is doing right now, if you knew nothing else?
Um, that's actually a really tough one, which probably says something about this moment in economic history, which is no one really knows anything. You know, we had these tariffs that came in and everyone was expecting, not everyone, but many people were expecting those to have an inflationary effect. We haven't necessarily seen that, even on things like unemployment. But a lot of people have been concerned about a recession for ages now, and that just hasn't materialized. I think a lot of the sort of traditional economic thought that should dictate how things develop and unfold isn't bearing out. And so I would describe the economy as unexpectedly chaotic, perhaps. It's just not acting the way a lot of people thought it would in the current situation.
Is it chaotic or is it unexpectedly normal? I kept thinking
as I was looking at this data that if you
just showed me the macro debt of the year, if you show me the jobs numbers like month on month, show me GDP, showed me inflation.
Yeah, that's fair. And I didn't know
any storyline. I would say, hey, pretty normal year in the economy.
Yeah, there's a layer of policy chaos built on top of an economy which seems surprisingly resilient to that chaos.
Joe, what's your state of the economy gloss?
Yeah, I mean, I want to echo basically the same thing that Tracy said. Look, there is clearly a labor market deceleration happening. I don't think anyone would dispute that. So now unemployment is, as of November, 4.6%. All that being said, you know, the temptation is to assume that, OK, you have this creaking labor market and then it snowballs and then you have like a proper recession.
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Chapters
5 chapters
1
Why does the 2025 economy feel chaotic despite normal macro data?
0:00–9:46
2
How did the Trump administration’s tariff policy evolve throughout 2025?
9:46–20:18
3
What impact did the AI build‑out have on U.S. GDP growth in 2025?
20:18–36:46
4
Are AI‑driven data‑center investments creating a financial bubble?
36:46–59:59
5
How is the AI race influencing labor market dynamics and job security?
59:59–1:19:41