Planned Episode 9/17/2026

The FOMC has raised the target range for the federal funds rate by a quarter of a percentage point, reflecting ongoing economic expansion. Despite job gains keeping the unemployment rate around 4.1 percent, concerns persist about the labor market's strength, particularly as many young individuals are opting out of job searches.

Inflation remains a significant issue, driven by ongoing energy supply disruptions, with the 12-month change in total PCE prices at approximately 3.6% in August. Core PCE and CPI prices are reported at about 3.2% and 2.4%, respectively. Consumer spending is beginning to decline, leading to noticeable changes in behavior among big box retailers.

The speaker highlights that the concept of full employment is misleading if it does not consider those who have exited the job market, noting that 47% of the federal budget is already allocated to entitlements for these individuals. The current economic landscape is precarious, with predictions of rising long-term bond yields due to distrust in inflation management and geopolitical influences.

A task force will be established to evaluate the implications of artificial intelligence for future policy, emphasizing the importance of the Federal Reserve's independence in this context. The economic divide is stark, with half the population feeling the economy is struggling while the other half thrives, underscoring the need for effective debt management and genuine economic growth.

The episode discusses ongoing economic challenges, noting that while some individuals are thriving, many are hindered by artificially low interest rates. Predictions suggest that inflation rates are unlikely to improve soon, particularly with escalating tensions in the Middle East. Saudi Arabia is expected to face challenges in restoring its East West pipeline for six months, contributing to persistent oil disruptions and rising prices.

The speaker argues that raising interest rates will not effectively control persistent inflation due to instability from ongoing conflicts. The recent quarter-point rate hike is viewed as inadequate to address the underlying energy supply issues. While the Federal Reserve can influence individual prices, such as oil and food, its broader economic management capabilities are questioned.

Consumer confidence is reported to be at a historically low level, with Americans expressing concerns about rising unemployment, reflecting a recession-like sentiment despite no official declaration. The effective unemployment rate has increased, and there is widespread dissatisfaction with financial conditions, contrasting sharply with the Federal Reserve's optimistic view of a resilient labor market.

The episode also addresses the impact of young people opting out of the workforce on labor force participation, with projections indicating that the unemployment rate may rise over the next year, potentially reaching its highest level since 2020. There is a cautionary note regarding the risk of deflation if consumers exhaust their financial resources.

The anticipated economic impact of AI growth over the next 6 to 18 months is discussed, with a belief that current strategies may need reevaluation if they do not yield results. The servicing of debt is highlighted as a growing concern, and the energy crisis is seen as a potential obstacle for the Fed in managing inflation. Skepticism about the political representation of the current economic situation is also noted, along with two growth strategies proposed by Trump—protectionist tariffs and reliance on AI.