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U.S. economy shrank as GDP fell 0.9% in second quarter of 2022 - YouTube
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and we are following breaking news this
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morning the commerce department says the
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u.s economy shrunk by just less than one
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percent in the second quarter of 2022 in
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the first quarter the gross domestic
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product decreased at an annual rate of
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1.6 percent two quarters of a negative
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gdp
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sometimes signals the country is in a
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recession but some some analysts may not
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agree
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meanwhile today's labor department
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report shows first time unemployment
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claims dropped to 256 thousand for the
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week ending july 23rd that is a decrease
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of 5 000 from the previous week let's
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take a look at how the markets are
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reacting this morning to all the data
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and there you can see the dow is down
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about 127 points uh we should expect
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continued volatility i mean the market
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was up yesterday because it had already
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built in or baked in the federal funds
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uh the the fed increase but but you know
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these numbers uh which i think again the
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market was expecting so i don't expect
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to see a significant decrease today in
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the market but you're going to see this
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continued volatility over the next
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couple of days we'll of course be
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watching it
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in a statement a short time ago
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president biden said quote we are on the
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right path and this he says is the plan
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is to be focused on bringing down
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inflation without giving up on all the
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economic gains we have made so far
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here to discuss the latest gdp report
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and the federal rate hike is senior u.s
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and global economist at bank of america
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aditya bave
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aditya thanks so much for joining us so
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the biden administration has been
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touting
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the strong labor market as an indicator
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that we are not in a recession based on
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the latest gdp report though
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historically as i've always come to note
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even when i worked for you know the 20
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years that i spent on wall street that
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two negative quarters of gdp growth
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indicate that we're in a recession are
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we not
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right good morning so we're probably not
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in a recession at this moment it is a
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very unusual time as you suggest two
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consecutive quarters of negative gdp
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growth is known as a technical recession
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the official arbiters of whether we're
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in a recession or not are the national
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bureau of economic research
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and their approach is basically that we
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don't want to rely on just gdp because
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there's potentially measurement problems
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so let's look at a variety of indicators
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they so they look at you know job growth
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income growth consumer spending and when
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you look at that whole picture job
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growth is still very very strong income
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growth is solid although a lot of that
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is eaten into by inflation and consumer
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spending was actually still positive in
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the second quarter although it
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decelerated a little bit from the first
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quarter so when you put all of that
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together it looks like they're probably
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not going to say we're in a recession
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just yet
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yeah why are we seeing such high
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inflation though you talk about job
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numbers being strong unemployment is at
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3.6 percent
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[Music]
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um yeah so i think it's
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that's part of the reason that we're
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seeing inflation it's a demand as well
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as a supply story so on the demand side
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the u.s consumer is doing still pretty
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well was doing extraordinarily well last
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year and that demand that was driven by
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fiscal stimulus that was driven by
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the strength in job growth wage
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inflation all of that has contributed to
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a pickup in inflation and then of course
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on the supply side there's a whole bunch
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of stuff that's you know outside the
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control of u.s policy makers so what's
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happening with energy and food prices is
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largely a function of the russia ukraine
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conflict there's a semiconductor
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shortage that's affecting
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auto prices there's supply chain
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disruptions of asia and so on yeah
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so
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as we've been pointing out inflation has
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put a dent in u.s consumer confidence uh
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and yet we all know that during the
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pandemic uh there were a lot of people
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millions of americans actually saved
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money during the pandemic the united
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states went through a period which is
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kind of rare where we had a significant
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spa uh savings rate um and so given that
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we are in this inflationary period we're
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in this perhaps recession but people
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have money that they've been able to
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sock away what does that mean long term
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right i think that
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money is probably going to provide a
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decent buffer against the inflation
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shock that we're seeing so we do expect
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consumer spending to slow going forward
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we actually have a recession in our
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forecast for the second half of this
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year but those excess savings should
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cushion the blow and should mean that
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the recession is relatively mild and
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where can we expect to see and feel the
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fed's interest rate increase and
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particularly how will that impact the
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housing market
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right so that's exactly where you would
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see you would see it in financing costs
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and housing and autos would probably be
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the
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two sectors hit the hardest now with
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autos there's also a lot of pent-up
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demand so i would focus on housing
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there's certainly downside to the
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housing market we're already seeing a
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big slow down
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the good news there or the silver lining
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is again that supply is very tight in
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the housing market and a lot of the
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demand has been driven by fundamentals
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rather than speculation by which i mean
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this very large cohort of millennials
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coming of age starting families moving
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into larger spaces
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so that probably limits the downside to
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the housing market all right aditya pave
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thank you so much
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