N P R. This is the indicator for planet money.
I'm Adrian Ma and joining me today is some end of the year cleaning is a planet money's cohost Kenny Malone.
Hi ho. Hi ho. It's off to cleaning work.
We go. Let's do it.
With a Disney theme very unbrand Kenny and Jeff.
Whoa. Hey guys. Okay guys.
I think we've got pretty much all of 2024's indicators cleaned up and cleared out of the closet.
There is one more mysteriously unmarked box here though.
Just if I can take this out here and let's see what's inside this thing anyway.
Adrian is that is that a glowing orb.
Oh my God. I think we should touch it.
Sure why not all at the same time.
Ready. Let's say three two one.
I feel like I can see it all.
The future. The present.
I've been blessed with the knowledge.
Time is a flat circle.
Are you seeing it too.
Oh yeah. I'm seeing indicators of the year ahead.
Oh my gosh. After the after the break.
See I saw I saw that you were going to say that.
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My indicator to watch for 2025 is inflation expectations.
This is an indicator that you could find in more than one place like the Federal Reserve Bank of New York has won the University of Michigan has their own version and basically what they do is they conduct a survey of consumers and ask where do you think prices will be one year from now or two or three
years from now et cetera.
Oh ask the people the wisdom of the crowds.
This is good. And yes.
An agent you trust the wisdom of the crowds is what you're saying.
Yes of course implicitly no PhDs allowed in this space.
OK. So the reason I think this is going to be an important indicator in general is that it gives us a hint about how consumers will behave in the future.
Right. If consumers believe that inflation will increase in coming months they'll be more likely to want to spend their money now before it loses value.
But also if these consumers are spending money like there's no tomorrow that can actually contribute to inflation and make inflation a self fulfilling prophecy and at worse become an inflationary spiral.
But I think that this indicator inflation expectations is going to be pretty important in 2025 because even though inflation has come down we got president elect Donald Trump will be taking office soon and his economic proposals have a lot of economists worried about possibly a new round of inflation right.
He's proposed tariffs which as we've talked about on the show could make foreign products more expensive.
He's pledged to carry out mass deportations of unauthorized immigrants which could be a double whammy for businesses that employ those immigrants.
Right. Because they could incur costs from losing employees who work for them and may have to raise wages to attract new workers and all that could also contribute to rising prices.
All right. So inflation expectations Adrian.
That's pretty good.
Pretty good. Jeff Cole what is the glowing orb foretell in your eyes.
I think you know we can all agree that 2024 was a big year.
And the big question going into 2025 is just how much has that world changed.
And that is why my indicator for 2025 is the indicator of all indicators.
Our star. Long time planet money listeners may know that our star is something we are kind of obsessed with.
It's it's an arguably a mythical number really.
Yes. And so just to give like a brief explanation you know how like the Fed sets interest rates right.
Yeah. Interest rates are like a thermostat for the economy.
Basically if the economy is running too hot the Fed will raise interest rates to try to cool it down.
And if the economy is running too cold then the Fed will lower interest rates to try to stimulate it.
Well our star is supposed to be that ideal interest rate for the economy in the long term.
So it's like when you finally find the perfect temperature on the thermostat where your room is not too hot and not too cold.
Yeah it's like a reflection of just your natural metabolism and nobody actually knows what our star is for the economy.
It's not something you can measure.
It's more of something you predict.
It's based on what you think the future economy will look like.
Whether you think it'll run hot because of a lot of government spending or if you think it'll run cold because of you know lack of opportunities for growth.
All right so these are huge important predictors of where the economy is going and and sort of how how much the engine should get revved up.
Yeah yeah. Why do you think it's important now.
Well because something really interesting is happening to our star right now.
You know before the pandemic a lot of people thought that our star was around like one to two percent.
But after the you know chaos of the past year the past couple years really people right now they're really not sure what the future holds.
They're arguing is our star maybe like three percent.
Maybe it's going to go up to four percent.
And I suppose it depends to some extent on on what you think about the long -term consequences of I don't know AI and productivity unrest in the Middle East of various Trump presidency policies.
That's a big one. Yes yes our star is basically everything.
And right now we are at this kind of weird inflection point I feel like for the whole world.
So in 2025 I think the big story is going to be what is our star.
Let us turn to Kenny.
What is your indicator to watch this year.
Yes it is my prediction gentlemen that 2025 will be the year of global trade baby or lack of global trade.
Depends we're going to see because that is that is my indicator of next year.
It's going to be global trade or the opposite.
Yeah just stuff moving around the world.
And of course at the heart of watching this next year is anyone anyone rhymes with sans serif.
Tariffs. Tariffs yes tariffs.
President -elect Donald Trump has floated at various times like a lot of different potential tariffs so there was at some time floated a baseline tariff of 20 percent on all imports 25 percent on goods from Mexico and Canada and as much as 60 percent on goods from China.
Those are likely the extreme ends.
We don't know for sure where the tariff numbers will land.
And of course that has me thinking a lot about anyone anyone rhymes with cute folly anyone.
Smoot Holly. Smoot Holly of course.
Yes these are the infamously big and broad tariffs passed in 1930 which are then featured in a boring lecture in the movie Ferris Bueller's Day Off where the teacher keeps saying anyone anyone which is why I keep doing it but the thing is following those enormous tariffs global trade dropped by about 26
percent. It was a lot and so for my money now global trade is what we should be watching next year.
We are nearly a hundred years post Smoot Holly.
The world is more globally connected than ever and what happens when you drop gigantic tariffs into that world?
And I think it is worth watching next year.
Well we have peered into the glowing orb and we have somehow survived with all our digits intact.
Speak for yourself.
Oh no Kenny. My very long toes are gone.
I don't want to show you but they are very long.
I hope it was worth it.
Jeff Kenny thanks again for coming on the show.
Absolutely our pleasure and next time I'm gonna bring sunglasses.
I gotta you gotta tell us ahead of time there's gonna be glowing anything.
Yeah thanks for sharing the curse of knowledge with us.
I will share the curse of knowledge with you anytime.
Before we wrap up we did want to take a moment as the year comes to a close to say thank you to each other but to you listener for your support.
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2024 has been a good year.
Such a good year in fact that for the next few days we'll be running some of our favorite episodes from 2024.
Happy holidays, happy new year to you and yours.
We'll be back on January 2nd 2025.
This episode was produced by Angel Carreras and engineered by Neil T.
Volt. It was fact checked by Sierra Juarez.
Cake and Cannon edits the show and the indicators for production of NPR.
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