At least two more Fed cuts likely in 2026, says Moody's Mark Zandi

Carl Quintanilla (Anchor) 00:00.350

here to react as moody 's analytics chief economist mark zandi mark happy holidays thanks for being with us

Mark Zandi (Chief Economist) 00:05.630

my next call happy holidays

Carl Quintanilla (Anchor) 00:07.910

any reason to think that claims are going to see move into dangerous territory anytime soon doesn't

Mark Zandi (Chief Economist) 00:13.990

feel that way i mean that's really good news i mean layoffs remain very low i mean i you know one week affected by holidays and timing and seasonal adjustment and all kinds of measurement issues but feels like underlying UI claims weekly is about two hundred and twenty five K

Mark Zandi (Chief Economist) 00:28.110

that's that's good anything over two fifty i started paying real close attention two seventy five i started saying off yellow flares and three hundred K would be recession so we're not anywhere close to that but we're it's fortunate though carl because businesses still aren't

Mark Zandi (Chief Economist) 00:42.590

hiring and as a result there is no job growth job growth at best is flat and i suspect is even down after revision so fortunately businesses aren't laying off that's the key to keeping the economy moving forward and avoiding a recession

Carl Quintanilla (Anchor) 00:57.910

chatter today about when you print a four three quarter on GDP and the average growth of jobs per month is fifty one K the spread between economic growth and hiring a lot of people argue will be one of the major themes of twenty six

Mark Zandi (Chief Economist) 01:14.190

yeah i don't know i mean you know that's one quarter i mean the data is going up and down and all around it fell in the first quarter i mean if you take a year over year growth rate to abstract from the vagaries of the quarterly data it's two point three percent and i suspect Q

Mark Zandi (Chief Economist) 01:28.070

four is going to be weak probably closer to one obviously the government shutdown will play a role there they'll put year over year growth at two and to me that's underlying job excuse me GDP growth that's where the economy is abstracting from the vagaries of the data at two

Mark Zandi (Chief Economist) 01:41.910

percent if you have you know productivity growth that's one and a half to two you're not going to create a whole lot of jobs so it feels pretty consistent to me

Melissa Lee (Anchor) 01:50.030

you actually say the four point three percent mean that it's fragile growth what do you mean by that and which way do we go and and are there things prods that can push it in either direction yeah

Mark Zandi (Chief Economist) 02:04.070

you're reading my notes i didn't i'm glad to see that i was worried that i would write them and no one read them but you're reading them yeah it's fragile because we're not creating jobs melissa i mean i don't know how we can feel comfortable about the way things are going if

Mark Zandi (Chief Economist) 02:17.840

we're not creating jobs and unemployment is rising it's still low four point six percent but that's now meaningfully above i think most estimates including my own of full the full employment unemployment rate that's closer to four you know you can see wage growth is slowing

Mark Zandi (Chief Economist) 02:33.320

consistently with that so that to me is a very fragile situation i mean if anything doesn't stick exactly to script and consumers pull back a little bit then you know we're going to see some job loss and that's the fodder for and then layoffs and that's the fodder for an

Mark Zandi (Chief Economist) 02:48.590

economic downturn so i don't know that i'd take a whole lot of solace in the four three i mean i i think what really is is key here is jobs now there's a lot of factors that can spring it one way or the other on the upside we got a lot of monitoring fiscal juice coming and maybe

Mark Zandi (Chief Economist) 03:02.110

even more than we think we could get another reconciliation bill that could provide stimulus the tariffs could go away half of them could go away when the supreme court rules on the reciprocal tariffs and the president may not you know find another way to raise tariffs that

Mark Zandi (Chief Economist) 03:14.230

would be helpful to the economy and the fed could step on the accelerator more than anticipated fed independence is certainly an issue so that's the upside the downside you know you know it goes back to AI i mean AI is powering a lot of economic growth and by the way melissa

Mark Zandi (Chief Economist) 03:28.430

that's the one factor that surprised me most in twenty twenty five was just how much juice it provided both through investment in the wealth effects but either investors are right about what's going on and we're going to get a lot of productivity growth and with no job that

Mark Zandi (Chief Economist) 03:42.870

might mean job loss and that makes me nervous again going back twice earlier and then conversely the investors could be just wrong about the strength of the productivity growth and the profitability that we're going to see here and if that's the case the stock market is going to

Mark Zandi (Chief Economist) 03:57.390

correct and that's going to knock the the legs out of one of the pillars of growth and that is the high stock prices AI stock prices and the wealth effect that generates there's there's risks on the sides of of kind of this fragile growth that we're experiencing

Carl Quintanilla (Anchor) 04:10.310

that's a key risk for many going into twenty six mark did you go back and try to give us a cleaner read on CPI was it warmer than a two seven or

Mark Zandi (Chief Economist) 04:20.110

yeah i mean i was pretty annoyed by that CPI i mean i get it i mean the bureau of labor statistics had to make some choices about what they were going to do for the month of october because there was no survey given the government shutdown so you know no matter what assumption

Mark Zandi (Chief Economist) 04:35.790

they made there they'd be a lot of questions but they assume no basically no inflation no change in prices for the you know vast majority of goods and services in october and obviously that makes no sense whatsoever so we went back with good good product by product good by good

Mark Zandi (Chief Economist) 04:51.470

service by service looked at what private sector data we had we have our own ways of taking that and translating that into what it means for CPI calculated CPI based on that set of assumptions and we're right back to three percent so in in my thinking you know inflation CPI

Mark Zandi (Chief Economist) 05:07.510

inflation is three percent which is you know obviously well above the fed 's target which on CPI is probably closer to two point two or two point three percent so we're going to keep track of this you know for at least for a year until we get to next october because the year

Mark Zandi (Chief Economist) 05:20.790

over year number is going to be biased lowers as a result of the choice that BLS made here as well but i won't you know nerd you out on those things but but that was the biggest thing