The compendium of a better labor economy and various stimuli: you have to reset real GDP and nominal GDP. Are you in that process right now?

We already felt the economy was doing just fine. America needs workers, not jobs. This report shows cyclical momentum forming underneath: gains were broad across all sectors, not just healthcare. Leisure and hospitality had a big number, signaling the consumer is okay. Tariffs seem to be passing through inflation channel, not jobs channel.

The marketplace has a red headline pricing in a 25% hike in rates by year-end. How does that drive with you?

All those dissenters at the last Fed meeting who said we should not have an easing bias are smiling this morning. Let's start by removing the easing bias: stable employment at 4.3%, headline inflation coming in about 4% this month. There's no reason for an easing bias. However, a hiking bias? I'm not there yet. No wage spiral evidence, core inflation is still okay.

If I got 2% real GDP, add on inflation, do I have a banana republic nominal of 5% or dare I say 6% nominal GDP?

That's the math of it. This economy is really hard to bet against due to structural factors: three heavy pillars of AI, government, and healthcare. What's moving now in the last 2-3 weeks is structural support overlaid with cyclical momentum. It's still early, but layering structural guardrails with cyclical support from a slightly better consumer and some relief on tariffs starts to get towards a different paradigm.

Average hourly earnings rose 3.4%, lower than last period, but core CPI year-over-year is 4.2%. The consumer vis-a-vis inflation is struggling. How do you think about the consumer these days?

For years, the US economy was the US consumer, and the consumer was about having jobs. Now, if you're an American and want a job, you probably have one. The question is whether it pays enough to afford the cost of living. That's not just average hourly earnings but also hours worked. Today, we didn't see a decline in hours worked, which is stable.

We're not talking about massive changes in immigration or the massive delta of declining government employment. Do you have clarity out into 2027?

We spend enormous time talking about retirements and their critical role in the decline in labor force participation rates through 2026. Our estimate of break-even employment in the US is 20,000 jobs per month to keep unemployment stable, largely driven by retirements more than immigration policy. 20% of US income is government transfers, making the economy less cyclical.

Neil Dutta of Renaissance Macro says: 'Stagflation is bad for stocks. An inflationary boom is not.' Comment on that.

Think of growth and inflation as a 2x2 matrix. Growth down and inflation up is stagflation. Growth higher and inflation higher is reflation, a heating-up economy. Reflation has a clear Fed response: they know what to do, hike rates. Stagflation pulls the Fed's dual mandate in opposite directions, creating a bad environment for businesses and enormously challenging for central banks.