Heather Long
Appearances
Today, Explained
Fear is the economy killer
I'm Heather Long, an economic columnist at The Washington Post.
Today, Explained
Fear is the economy killer
Yes. Yes, there are. Traditionally, it's the unemployment rate jumping up a lot. People are keeping a close eye on the early signs of that. The other one that I'm keeping a close eye on is is consumption, retail spending. And in particular, I've been watching the normally very dull earnings reports from the companies, but I think the companies are being pretty explicit.
Today, Explained
Fear is the economy killer
You know, they're not out there saying, you know, Trump this, Trump that. But they are saying pretty clearly we are ratcheting back our forecast for this year, particularly like a lot of the consumer facing places are really feeling it.
Today, Explained
Fear is the economy killer
It's really been almost a one-to-one reaction to the tariff plans. Initially, there was the huge rally, this belief Trump's coming back, we're going to be in the boom time. He's talking about deregulation.
Today, Explained
Fear is the economy killer
He's talking about tax cuts. For everybody, they're in there, they're waiting for you to vote. But then every single day since the election, he would mention tariffs.
Today, Explained
Fear is the economy killer
And not just in passing. It was this tariffs are beautiful, tariffs are wonderful, tariffs are going to revolutionize America kind of message. Because tariffs are going to make us rich as hell. It's going to bring our country's Business is back that left us. And for a long time, Wall Street didn't take that seriously. But February, early February, so a hit. And he puts those tariffs.
Today, Explained
Fear is the economy killer
Who does he go to first? Mexico and Canada. You know, that was not expected. So the market starts to go down early February. Trump pulls them off. Then we kick it to that crazy week in March. And it was just mind blowing, even for traders on Wall Street, whose whole job is to be able to react in microseconds. This was just crazy.
Today, Explained
Fear is the economy killer
Goldman Sachs still pretty conservative around 20 to 25%. But everyone agrees the recession risks have really gone up.
Today, Explained
Fear is the economy killer
And so I think that's when Wall Street really started to say, wait a minute, our entire read on what Trump is trying to do with these tariffs is probably wrong. And we need to really take seriously that there could be some mistakes or that this trade war is going to be way bigger than we were estimating.
Today, Explained
Fear is the economy killer
And now, of course, we've kicked it to April 2nd is the new, oh my gosh, what's really going to happen day for on these tariffs.
Today, Explained
Fear is the economy killer
Oh, yes. Oh, yes. And so two big things are going on. Number one is a significant number of people have been buying ahead of the tariffs. So you saw a bit of a splurge or a mini boom, if you will, and people trying to buy a car. are trying to get their home improvements done basically before Trump took office and certainly by March 1st.
Today, Explained
Fear is the economy killer
And that's actually masking a lot of the pain that I think we could potentially see soon. I think the second noticeable thing that's different is, look, people are very concerned about inflation and they're watching, you know, they are watching the egg price crisis.
Today, Explained
Fear is the economy killer
Yes, that's the big question. I'm on a scale of 1 to 10. I'm probably somewhere around a 5 or 6 now, which is way higher. If we had this conversation in January, I think I would have been like a 2. So it just shows you how much it's jumped up. You can pick your favorite economist. I think JP Morgan put the recession odds at 40%. Larry Summers was at 50%.
Today, Explained
Fear is the economy killer
They're starting to see and get notes from retailers or from electric utilities warning them that as these tariffs go into place, bicycles are going to cost more. Your utility bill could come up if you get your energy partly from Canadian hydropower, Canadian oil that's coming across the border. So I think people are very tuned into this and can really start to see it tangibly. Yeah.
Today, Explained
Fear is the economy killer
Yeah. And this is so different than before. Partly it's tariffs, but even more so, I think the Trump administration, particularly Elon Musk, did not understand the psychology of this doge craziness.
Today, Explained
Fear is the economy killer
You know, they're so eager to show that they are cutting all of these federal jobs. But what it's really doing is freaking Americans out, even if you don't work in a federal government sector. You know, I've heard from daycare workers who suddenly say, wait a minute, if a bunch of people in my area lose their job, does that mean they're not going to take their kid to daycare anymore?
Today, Explained
Fear is the economy killer
And so I lose my job or restaurant workers thinking the same thing. Wait a minute, are all these people not going to come out for their birthday dinner anymore? And so my job's on the line or my hours get cut back.
Today, Explained
Fear is the economy killer
What's different now than what I was seeing even a couple of weeks ago is when you look at these consumer sentiment surveys that are really in the dumps now, you know, people are very afraid. People, this is the vibe session. Trump is in a vibe session, let's call it. People, when they're asked, do you think unemployment will go up?
Today, Explained
Fear is the economy killer
in six to 12 months or do you think you will financially be worse off? There's been this crazy spike in people who think they or someone they know is going to lose their job very soon and that their finances are going to be worse off. And that was different. Under the Biden administration, a lot of people gave very poor grades to the economy. They didn't like the economy. They were very worried.
Today, Explained
Fear is the economy killer
But when they were asked, are your personal finances going to be better off in six to 12 months? The vast majority of people would say yes.
Today, Explained
Fear is the economy killer
And now, what do you do? What do you do if you think there's going to be a recession or you might lose your job, right? People are pretty rational about this. And of course, they stop booking vacations. They stop going out to eat as much. You know, they start cutting back.
Today, Explained
Fear is the economy killer
You can see it in the data where at places like an Applebee's or an Olive Garden, you know, people are not ordering appetizers and desserts anymore. You know, they're really pulling back or they're simply not going at all. And these earnings calls for these types of chain restaurants are talking about people who earn $75,000 or less just aren't coming anymore.
Today, Explained
Fear is the economy killer
And so I think people are a little bit tapped out. The savings is run down, you know, now they're fearful and now they were already starting to turn a little bit and belt tighten and now it's like extreme.
Today, Explained
Fear is the economy killer
It does if the fear turns into action. And we're at the early edges of that. And so we just saw in March this wave of all the airline companies come out and say bookings are really weak so far this year. They can see that people are not eager to book vacations like they were in the past few years.
Today, Explained
Fear is the economy killer
And so I think, you know, is that that probably there's an easy potential for that to continue to build. And the question is just, are we going to slow down enough to be in a recession?
Today, Explained
Fear is the economy killer
I mean, the answer is no. Obviously, a number of other countries around the world are much more economies dependent on producing things and exporting them. That was certainly China's model and to a certain extent, the German model, so much less reliant on consumption. So right now, the U.S. is 70%.
Today, Explained
Fear is the economy killer
of our economy is consumption-led, is people going out and eating out and purchasing those soccer balls and purchasing trips to Disney World. And I think the Trump administration has been making this argument. The Treasury Secretary Scott Besson has been saying, you know, look.
Today, Explained
Fear is the economy killer
And that's why the Trump team, if you want to try to give them some sort of credit for having a strategy here, I think the best I can tease out is they honestly believe that the U.S. should follow the model of Argentina and President Javier Malay.
Today, Explained
Fear is the economy killer
Argentina's a mess, but what I mean by that is have a quick recession or a quick downturn and then use that to come out on the other side and then really invest and grow the private sector, specifically the manufacturing sector. You know, there's a million questions. Can we do that? Is it achievable? How much can we really bring back? How many jobs could really be brought back?