[music playing] ANNOUNCER: Support for this special conversation comes from the Gertrude J. Sandt Endowment, the James H. Olay Family Endowment, the Sidney and Helen S. Friedman Endowment, and from viewers like you.

Thank you.

CAROLYN DONALDSON: Hello and welcome to a conversation on the state of the economy.

I'm your host, Carolyn Donaldson.

We're bringing you this program from the Dr. Keiko Miwa Ros WPSU production studio taped the morning of February 16th.

And joining us to discuss what we believe is perhaps the number one issue in America for most folks right now are two distinguished members of our Penn State University faculty.

Dr. Qi Li is an Assistant Professor of Economics in Penn State's College of the Liberal Arts.

Her research includes search and matching, population economics, and innovations and growth.

She recently did a project on the effect of monetary policy on racial inequality in the housing market.

Dr. Fariborz Ghadar rejoins us again for this program as a noted expert on future business trends, global economic assessment, global corporate strategy and implementation, leadership development, e-business, and international finance and banking.

He is the William A. Schreyer Professor of Global Management, Policies, and Planning and the former founding director for the Center for Global Business Studies here at Penn State.

He serves as Senior Advisor at the Center for Strategic and International Studies.

We welcome you both and thank you so much for spending time and joining us today to offer your insight.

Now, judging by a response that we had when we posed this question on Facebook recently to get your questions and comments, we asked for your thoughts, and you had a lot to say.

In fact, over 1,100 of you responded with the comments and questions and concerns.

And we'll hopefully get to some of those questions and comments to our guests in just a minute.

But a lot of it revolved around the perception versus the reality of our economy.

And from my reading of some of those comments, my takeaway as we begin this discussion is whose economy are we looking at today?

It depends on where you sit in the economy as far as your perception and the reality of how things are.

But we tackle this question every year.

And last year right around this same time, we had this similar program.

And at that time, we started talking about concerns of a recession.

Last year's program featured Professor Ghadar along with another colleague from Penn State, Professor Weathering, who actually predicted that we wouldn't have a recession based on the numbers that were coming in.

And so far that has turned out to be true.

So let's begin our discussion today with a look at that clip and then hear from our two distinguished guests.

[video playback] Well, I would look at three things.

And Hillary already mentioned a couple of them.

One is unemployment, one is workers' participation, and finally consumer spending.

The unemployment and worker participation is pretty good.

Up to now, consumer spending has been pretty good.

And as long as those three more or less stay where they are, I do not believe we're going to have a recession.

And we may slow down, but we're not going to have a recession.

However, in particular, if consumer spending all of a sudden dries up or slows down, I think we will have a recession.

But if we do, in my opinion, it will be mild.

The thing that's I think important to keep in mind, especially as now we have this kind of mixed economy with high prices but really strong wage growth and low unemployment, is when they both kind of go the same way, when we see the same sign.

And so if that happens, then I think I would be more concerned about a recession.

[end playback] CAROLYN DONALDSON: All right.

That was last year right around this same time.

So now we're going to start on that point and fast forward to where we are today.

And I guess I want to begin with Professor Ghadar, because you correctly kind of forecast what we're in right now.

Is that correct, professor?

FARIBORZ GHADAR: Carolyn, yes, good morning.

Yes, very much so.

And that actually ended up being better than we had forecasted.

Inflation gradually did decline and job market looked great.

And really in the past few years, salaries increase faster than inflation.

So everything looked a lot better than we had even thought about and certainly much better than what everybody was reporting.

CAROLYN DONALDSON: All right.

We'll get into some of the more specifics as part of our economy.

But Dr. Li, you weren't there.

I'm sure you were looking at all those numbers and doing all of your research.

How would you like to begin this conversation and commenting on what your colleagues spoke of last year and where we are today?

QI LI: Thank you, Carolyn.

Yeah, I really appreciated Dr. Ghadar's insight, which turned out to be perfectly true.

I think his comment a year ago still apply today.

We're still seeing pretty good job numbers and participation.

One thing that may be we see a little bit sign of weakening is on the side of consumer spending with recent retail sales number weakening a little bit.

So I will keep an eye out on the consumer spending side.

And also there are some reports on increase in credit card delinquency, which may put further strain on consumer spending side.

So that's one area we may should look into more in the future.

CAROLYN DONALDSON: OK. Great.

Well, to get a pulse on where we are now, we also sent our WPSU intern James Engel out into the streets.

And I'd like to have us play just a little clip of some of what he asked on the street of people.

And then we'll get into some graphs and take a look at those numbers.

[audio playback] Not doing as well.

OK.

Financially or?

Yeah, I mean, I find myself working part time work now, just so I can keep my status quo.

I don't think there's much difference.

I don't feel like it's changed very much for me.

For our family, I'm a Penn State professor, so not a whole lot has shifted in my employment, as it were.

I am taking on a little bit more independent consulting work to infill.

But yeah, I would say more importantly, though, is there's a general sense of existential dread facing so many.

Not just families.

My students that I teach are facing pretty bleak job prospects across the board.

And into that space where wages have stagnated but prices have gone up, that's not a great place for our country to be.

[end playback] CAROLYN DONALDSON: All right, perception versus reality.

Let's start with the numbers.

Let's look at a graph though to see where the numbers show our economy is.

And I'll have you comment, professors, if you'd like to weigh in on what we're looking at right now.

Dr. Ghadar?

FARIBORZ GHADAR: Sure.

What we're looking at is inflation in different segments.

Two segments are much more volatile.

So food and energy goes up and down a lot more.

But in general, the total amount is between 3 and 1/2, 4% in the chart.

It has slowed down.

My rent went up by 3.1%, and that was the consumer price index and not adjusted for seasonality.

So roughly 3, a little bit more than 3% is the inflation.

However, the perception is different depending on what you buy and where you buy it, et cetera.

Just as an example, I remember a few months ago eggs was a real problem.

And when I went to the supermarket, eggs were $7.50.

And I said holy cow, what is this?

And now, of course, I went to the supermarket a week ago and was only 2 and 1/2 dollars.

So depending on what type of egg you buy, where you buy it, et cetera.

So some of these are very volatile and some of these take a little bit of time to get into the system.

So people look at what was happening six months ago and it takes a while for their perception to change.

CAROLYN DONALDSON: Dr. Li, do you also agree based on your research what you're seeing those trends again?

Up, down, up, down, up, down.

I know gas also is one of those key indicators where we go to the gas pump and every week we're deciding is it, up is it down.

Your thoughts?

QI LI: Yeah, exactly.

So energy and food prices can be really volatile.

So that's why people tend to look at core inflation, which excludes these relatively volatile prices.

I agree with what Professor Ghadar mentioned.

But I do have, I guess, two points to add on to it.

One is that the CPI, we tend to think that CPI inflation, especially the shelter part of CPI inflation, actually lag a little behind of private rent inflation.

So right now the CPI shelter inflation is still relatively high and contributes to a larger inflation number.

But if you look at private rent transaction prices, it's actually going down in the past few months.

So in the next few months, when these private rent prices get reflected in the income CPI numbers, we should see a further decline in CPI shelter inflation.

So if everything else being equal, I expect to continue to see a reduction of official inflation numbers.

Another thing that Dr. Ghadar has already mentioned that I agree with 100% is that inflation is very much individual household measures.

Because depending on our consumption bundle, our experienced inflation or cost of living in general can be quite different.

There are some recent research addressing these issues to look at actual inflation for different types of household either by racial groups or by income groups.

Households of different characteristics actually experienced a different level of inflation.

For example, if you are a household that buy organic foods all the time, actually relative to non-organic food, organic food declines in its relative prices.

So your experienced inflation will be actually lower compared to a household that only afford to buy a normal produce rather than organic produce.

So it really depends on your consumption bundle and the relative price increase or decrease of the particular type of goods that you purchase.

CAROLYN DONALDSON: OK.

Very interesting insight there with your research.

FARIBORZ GHADAR: If I may, Carolyn, Professor Qi mentioned this very good point.

The inflation basket you perceive depends on what you buy.

One overarching issue is where is the inflation coming from?

And in general, the inflation on production has been very low.

And in fact, recently production costs have actually gone slightly low.

What has happened is the service sector inflation has just gone through the roof.

So if you go to the restaurant every day, you will really feel the cost of living increased.

And one of the things that we may want to talk about later is who are these service providers and why is there a shortage of them?

And what can we do about it?

So that ties in to this whole area we were talking about.

I mean, where are the costs going up?

And the cost of the service sector has gone up a lot higher.

So if you're going to a restaurant or you go and see a nurse or something like that, you will really feel the inflation.

CAROLYN DONALDSON: You feel the pinch.

Feel the pinch.

And we'll get to that discussion to feel the labor force as part of our discussion.

That's a very important point.

Let's get to wages and look at that in comparison to inflation.

And I know the professors here have already looked at this graph, but let's let everyone see this graph and please comment on this.

Because these are real numbers, and there's some telling things on this graph as well.

Is that correct?

QI LI: Yes.

Maybe I can.

FARIBORZ GHADAR: I'll let Professor Qi kick off on this.

CAROLYN DONALDSON: OK, great.

Dr. Li.

QI LI: Yes.

Thank you.

We can see that there are two lines in this figure with the blue line represents the growth of nominal wages in the US with black line representing the inflation rate.

We can see that during the COVID recession, there was almost a two year period when the inflation numbers is much higher than the growth of nominal wages, which represents a reduction in the purchasing power of people earning these wage.

But starting from March 2023, we see that actually the wage growth has catch up to inflation.

So in this period, we do see a positive growth in real wages, which are also representing an increase in the purchasing power of US workers.

CAROLYN DONALDSON: Very interesting.

And Dr. Ghadar?

FARIBORZ GHADAR: Yeah, if I can build on what Professor Li said, if you look at the chart in more detail, you'll notice that somewhere around 2020, inflation shot up, but wages did not increase.

And that changed by the time you get to 2022.

And if I read this chart correctly, by the time you get to 2023, wage growth is much faster than inflation.

However, if you recognize that people don't immediately see the effect in their life, they look back six months or a year, et cetera, so you can see the reaction of everybody who says, oh my god, my job's salaries haven't gone up.

That's true.

That happened a year and a half ago for a period of two to three years.

So that's the reaction that people actually feel.

And it's a correct feeling, but it's not in line with recent data.

CAROLYN DONALDSON: OK.

Very interesting.

If you are just joining us, real quickly, I just want to let folks that might be just joining us, I'm Carolyn Donaldson.

This is WPSU's conversation on the state of the economy.

We're talking with Dr. Fariborz Ghadar and Dr. Qi Li, two experts from Penn State on economics and finance.

And we're looking at wages, inflation as they relate to the economy overall.

And Dr. Li, you had one other point you wanted to make there.

I'm sorry I cut you off.

QI LI: It's OK. Yeah, I just want to build on to what Dr. Ghadar said.

Another dimension to it is people typically want to look at the levels.

But what we just saw is about the growth rate.

So if you think about levels, what people care about is the cumulative change.

So since we have two years where actually wage growth were behind the inflation rate, so you need some time to have a positive real wage growth to actually make up for the decline in purchasing power over those two years.

So right now I don't think we have already been to the point that our purchasing power reach back to the point before the pandemic.

So if the positive trend we are seeing right now continue for, say, another year, we may be able to go back to the pre-pandemic purchasing power and then maybe gradually people's perception will change.

So right now the levels aren't there yet.

And also because of the hysteresis of people's perception, the consumer sentiment is still below what it was before the pandemic.

CAROLYN DONALDSON: OK.

Very interesting.

And again, we started the program off with perception versus reality, the unbelievable number of comments we got.

So let's take a look next at some comments that we pulled out from the 1,100 that we received and have you folks comment on this.

Here Vicki who writes, obviously those with money, the companies, those who supply we're buying, we're doing quite well.

The price of groceries has hurt me having any spending money other than for food.

So that hits her right at the pocketbook.

Now, Bruce kind of similarly says, if you're in the top 5% of the wealthy of the US, the economy is great.

As I said, it's dependent upon where you sit in the economy.

If you're not, it's terrible, according to Bruce.

It will never change.

Wall Street does not reflect the economy of the US.

It reflects the economy of the top 5%.

Dr. Ghadar, I have to start with you, because you look at things globally.

Your thoughts and your comments responding to Vicki and Bruce's comments.

FARIBORZ GHADAR: To a certain extent, what they're saying and what they're perceiving is correct.

However, if you look at the stock market and say, well, the stock market has gone up.

Yes, it has.

And if you happen to have shares, you benefited from that increase.

But if you have a retirement account, your retirement account has been invested in the stock market.

CAROLYN DONALDSON: Exactly.

Right.

FARIBORZ GHADAR: So what they're saying is correct.

And in fact, Professor Li mentioned something just before, which was actually to the point.

If you look at the chart that you presented before, which was the salary increase and inflation index, if you look, there's a bullish there where you fall behind.

And then there's a little area in the past two years where you're ahead.

But if you add the period that you're ahead, the blue over the black at the end of this chart compared to that period before, you have not caught up with you having fallen behind in those years.

So the perception is also correct.

Percentage wise, your salaries have gone up.

But you haven't made up for the period of time during the COVID period where you fell behind.

Everybody from their angle is absolutely feeling the correct thing.

But the trend, if you look at it in the past three or four years, things have gotten better.

If you look at it and say, well, have I been compensated for the tragedy that I experienced during COVID?

And the answer is no.

And is the stock market done much better than your hourly wage?

Yes.

But everybody, not everybody, but a lot of people, a large percentage of the population are in the stock market, whether they believe it or not.

So whether you're an academic, one of the people said they're in the University, if you're in the University, you're part of either the Penn State retirement account or TIAA-CREF.

Well guess what?

TIAA-CREF is a mutual fund that also is invested in stocks.

So everybody said it partially correct and partially not.

CAROLYN DONALDSON: Got it.

Dr. Li, before we get to you, I do want to bring in a student comment, because I know that you work with the students every day and you do research with them.

So let's show I believe it's Trevor White, a junior who we asked some of the students at Penn State who are studying economics to weigh in on this important issue as well.

So Trevor, who's actually atmospheric science and meteorology and an econ major.

Now that's a good double major there.

Says that as we've said, we're flooded with articles about how well the economy is doing, but the country appears to be at a point of unstable equilibrium.

Many households are not financially prepared for emergencies nor have the means to become so, and the retirement seems more like a pipe dream.

I do hear that out.

I'm getting to that retirement age and my colleagues are saying that to me.

I'm going to keep working.

So firms continue to seek growth and expansion at the expense of consumers, according to Trevor's comment here.

It appears that we are headed to a point where in order for new firms to join the plethora of markets that exist, an immense amount of capital is required.

I guess I need to ask both of you to weigh in.

But Dr. Li, are you able to begin the conversation there and help answer some of Trevor's queries as far as that part of the economy?

And does that make sense in any way?

QI LI: Yeah.

I guess I'm in some sense very sympathetic to the comment here.

So recently there were a lot of sentiment on the great inflation, corporate greed and their pursuit of profit at the expenses of workers and consumers, and how those profiteering motives contributed to the inflation, for example.

So I have to comment on those type of sentiments.

One is that there are some evidence on the weakening of antitrust enforcement in the US in the past few decades.

And some suspect that it may have something to do with larger corporations' political influence and the judge and prosecutors' lack of or inability to perfectly enforce antitrust regulations and therefore the decline in competition and the raise in prices while the stagnation of labor wages.

So I think there is some truth to that.

Another thing that I want to mention is also I think a lot of the corporate profit increase that we saw during the past few years actually has to do with the supply restrictions happen during the pandemic and also several episodes of supply chain disruptions.

So I would say if there aren't further episodes of supply chain disruptions and also the pandemic is gone, so I think those record number of corporate profit will be a relatively temporary phenomenon.

So I wouldn't be so pessimistic to think that it's the end of workers and the forever victories of the corporations.

Yes.

CAROLYN DONALDSON: OK. Dr. Ghadar?

FARIBORZ GHADAR: Yeah.

I'm trying to figure out what he's meaning by unstable equilibrium.

And it could be a number of things and Professor Li mentioned a series of them.

But if you look at it from a perspective of a household, if they're assuming everything is in equilibrium, I'm going to make it very down to Earth, that means that their living house, the paycheck comes, they pay all their expenditures, they're feeling OK.

They're in equilibrium.

However, they only have $470 in savings.

CAROLYN DONALDSON: That's it.

FARIBORZ GHADAR: So the smallest thing hits this equilibrium, they will be in great difficulty.

So that's sort of on the grass root kind of perception of what he means.

But if he's talking about a more general economic point of view, I think Professor Li did a great job of explaining it.

But it's difficult to-- I'm having difficulty sort of understanding exactly what aspect of equilibrium he's talking about.

But if the smallest thing hits you and you only have $470 in your savings account.

CAROLYN DONALDSON: It hits you.

Yeah.

You know.

FARIBORZ GHADAR: That's true in Pennsylvania.

It's true nationwide, but it's also true in Pennsylvania.

CAROLYN DONALDSON: Yeah, that's it.

Hey, and speaking of that, let's get to a little deeper dive into our Commonwealth and our economy here in Pennsylvania and specifically in Central and North Central Pennsylvania where our audience is from.

So I want to play and begin again a little more of some man on the street interviews that James Engel did for us to get us talking specifically about the food, the housing, the other necessities that, again, the perception is that we spoke with there's some hard times and it's hitting our pocketbooks.

Let's take a listen and comment.

[audio playback] Groceries are definitely going up.

Gas went down and it's starting to come back up.

Electricity seems to be off the hook.

I think the economy is doing well, but I still think it's hard for people to get by.

I think rents are higher than maybe they should be.

The cost of food has gone up.

And if you look at unemployment rates, those are lower.

Many places minimum wage has gone up, but I don't know if it's enough to keep up with the costs of other things.

We're looking to cut bits and pieces from our monthly bills.

Going out and shopping ourselves as opposed to using Instacart or what have you.

I think living simply has become the moniker, not just for us but for so many in our friends circle.

And what's really odd is how the news continually reports these upbeat statistics about the economy in terms of the stock holding class.

And whereas that's great for the 1% or great for the top 10% of American households, the vast majority of Americans are facing ever increasing financial strains.

[end playback] CAROLYN DONALDSON: All right.

That last comment we just touched on as far as the economy and the stock market.

But let's break it down here in Pennsylvania with housing, health care, and child care costs.

Because we kind of touched on food and we looked at the graph.

So let's start with housing.

And Dr. Ghadar, in our previous discussions and last year you commented about how housing here in Pennsylvania is a little different than what it is nationally.

And then Dr. Li, I know you've done some great research on minority housing and the inequities there.

So let's begin first generally.

Dr. Ghadar, bring us up to speed with housing here in Pennsylvania and what's the reality of the economy here.

FARIBORZ GHADAR: Well, the interesting thing from the difference between housing in Pennsylvania and nationwide is housing costs in Pennsylvania is 2/3 the price of the nation.

And housing costs as a percentage of your income, your average income in Pennsylvania, is much, much lower.

So it's around 16% in the US.

It's 16% in Pennsylvania and 20 in the US.

In fact, health care costs in Pennsylvania is more than housing costs.

CAROLYN DONALDSON: Wow.

FARIBORZ GHADAR: However, having said that, if you want to rent or buy a house, that's a different issue that we can certainly talk about later.

But this is particularly difficult if the population that you interviewed were students or young people that want to get a starter home.

That's become much more difficult.

And that's two reasons.

One is we haven't built a lot of houses in the past five or six years or 10 years, for that matter.

We're 5 million housing short in the US.

And two is everybody who had higher mortgages when interest rates dropped refinanced and now have lower mortgage costs.

And if they want to sell their house, they have to get a higher mortgage cost.

So A, they're not selling their house.

And particularly in Pennsylvania, we don't really move around as much as people in Florida or California, et cetera, do.

So we have a population that's not moving, a population that has low cost mortgages, not putting their house on the market.

No houses have been built.

So lo and behold, if you're graduating and trying to get a house or rent a house, you'll find out that that cost is exorbitant compared to your income.

CAROLYN DONALDSON: OK. And to add to that, when we look at the minority population in Pennsylvania and beyond, Dr. Li, you have done some research, I understand, on how that is even a larger disparity.

Am I correct in that?

QI LI: Yes.

So my research was not specifically targeting our state.

But in general, we find that monetary policy, especially contractionary monetary policy, has a disproportionate effect on Black and Hispanic households, their home purchases.

So there's a stronger reduction in purchases from Black and Hispanic households when there is an increase in the mortgage interest rate.

And due to the degree of residential racial segregation in the US housing market, this also translates into a larger house value depreciation for Black and Hispanic neighborhood, because these neighborhoods rely on minority demands for those housing units.

So this is essentially saying that our recent monetary tightening may have a stronger effect on these communities compared to white households nationwide.

But follow on what Dr. Ghadar said that we do see that monetary policy tightening has a huge effect on the reduction of transaction.

This is because tightening both reduces the demand for housing and also the supply for housing unit.

Fewer builders build new homes.

Existing home owners are less willing to sell their homes, which they financed with favorable financial condition.

So there are both a restriction of supply and also a restriction of demand.

But usually the restriction of demand came in a little bit later with a lag, because we find that monetary policy affect housing demand mostly through employment.

So things right now we're still seeing pretty good employment numbers.

We don't see much restriction on housing demand.

So that's why if you look at the national housing price indexes for the past year, I think the recent trough is January 2023.

But since January 2023, national average house prices are actually increasing despite the unfavorable mortgage interest rate.

CAROLYN DONALDSON: All right.

Thank you for that insight.

If you are just joining us, we're about halfway through our program.

I'm Carolyn Donaldson.

This is a conversation on the state of the economy.

And we're talking with two professionals, Dr. Fariborz Ghadar and Dr. Qi Li, two experts on economics and finance from Penn State University.

So a comment that I want to come back to.

And that was when Dr. Ghadar was talking about the housing market in Pennsylvania and then health care costs.

Dr. Ghadar, you got me at that startling statistic that we're spending more money on health care here in Pennsylvania than we are on keeping us in a house.

Give us again those statistics and tell us how far off we are from the national average on this one.

FARIBORZ GHADAR: It's interesting statistics.

It primarily has to do with housing.

Housing costs are so much lower than average that therefore the housing costs to a family is lower than the average in the US.

But medical costs and health care costs is not that much lower.

It's actually a little lower in Pennsylvania than the US.

But compared to housing, it's still more in line with the national number.

The last statistics I looked at, which I believe was 2022, indicated that the average housing expenditures in Pennsylvania is around 6,000, let's say 7,000, while the costs for medical care is 8,000.

But that's completely different in other parts of the country.

CAROLYN DONALDSON: But we live here.

We want to stay here.

We want to stay healthy here, we hope, I guess, under that startling statistic.

Let me go ahead and then add on child care, because that was another startling statistic that I know Dr. Li and Dr. Ghadar in our conversations here gathering material for this program were disproportionately higher in this state.

So childcare, which is from birth to age five.

Who would like to begin the conversation there?

How are those affecting young families and especially single parents, single mothers primarily here in Pennsylvania?

When we look at that budget, how much are they spending on child care to stay in the workforce?

FARIBORZ GHADAR: I think Professor Li can probably add a lot to that.

QI LI: I can start with something about the allocation of skill.

So usually when I think about the childcare cost, I think about how it affects the female labor supply.

Because if childcare cost is prohibitively expensive, it discourage young mothers to enter into the labor force.

Instead they have to stay at home to take care of their young children.

But if you think about it, people they have different skills, different advantages.

So an efficient labor market should allow young mothers to work in areas which they can maximize their competitive advantage rather than sort of restrict them into the household and take care of the children.

Maybe they have the competitive advantage in doing so.

But I can imagine a lot more mothers, they have a competitive advantage in becoming a secretary, lawyers, or doctors, et cetera.

So if the childcare cost is prohibitively expensive, essentially it prevents people to use their competitive advantage and reduce the efficiency of the overall labor market.

CAROLYN DONALDSON: OK. And Dr. Ghadar.

FARIBORZ GHADAR: Yeah.

Childcare is kind of lumped in.

There's a substantial difference between childcare from birth to two years, from two to four years, and from four years to school.

It goes down.

It's much higher when the child in the first two years.

And then if you look at childcare, how much childcare do you actually use?

If you were to use childcare in total because you're employed and you're employed out of the house, then in Pennsylvania, more or less in line with the nation, 1/6 of your income or 1/7 of your income goes to child care.

However, if you're a single mom, childcare is roughly 1/3 of your income.

So if childcare is 1/3 of your income, that really makes it difficult to go and get a job.

Because immediately you give 1/3 of it to childcare.

And this is particularly an issue in the minorities, minority single moms.

This is a very difficult issue, and we really don't have good options right now.

So that's unfortunate.

CAROLYN DONALDSON: Yeah.

That is unfortunate.

That is.

We're going to talk about jobs coming up here in just a minute.

We did have, though, some comments from students.

And again, we're incorporating their comments.

We asked some of the Penn State students what they thought about the economy and specifically from their lens, from their frame.

And here we have Ryley Carroll, a freshman majoring in finance.

So he's heard a lot about the student loans and the cost of education being out of control.

So lenders basically let anyone get the student loan because of the schools are charging more.

Again, supply and demand, again, because they don't have to price competitively.

Now again, this is Ryley's perception here.

The cycle has had that negative effect on American people.

Existing school with a large amount of debt can create a numerous financial problems.

So how can the government, how can institutions, and how can people move away from student debt and make college more affordable?

And we do see some of this happening in the political spectrum with President Biden's recent recommendations on reducing student debt.

And again, the elephant in the room is, of course, this political overlay over the whole economy.

But when we talk about student loans, and again, Ryley's particular question, I'd love to get our experts' comments on student loan and its place in the economy and can we get that under control, I guess, is the best question.

FARIBORZ GHADAR: I'll start off on this one.

I'm sure Professor Li has much to add.

One is to look at it just from a numbers point of view.

President Biden tried to get $20,000 off from each student loan June of 2023.

The Supreme Court said that's unconstitutional.

So what the administration has done is try to loosen the nuts and bolts of student loans.

So if you're in this category, you can take 10,000 off.

In that category, you don't have to pay.

If you've been paying for five years or 300 months, you're OK, et cetera.

And all of that partially helps.

But the fundamental issue, which nobody seems to talk about, is the cost of university.

The cost of university has gone up and it's gone up substantially.

And we just ignore it.

Now again, looking at it globally, in Europe, most of the universities are free.

Society has decided that an educational system should not be a burden on people who want to get educated and work in the workforce.

In many other developing countries, the cost is minimal.

In the US, that's not the case.

So what we need to as a society ask ourself is, should the students who want to get educated and help in society be charged such a high rate?

And that's the question that society has to answer.

And the government doesn't seem to have that much influence on the private sector universities.

And so I think the problem is not student loans.

The problem is the cost of schooling.

And the students complain about it, but they don't articulate it the way I just tried to do.

Which look, many parts of the world, they want an educated workforce and an educated population.

Why in the US do we want students to pay $100,000 over a four year education system to walk out with a degree that may not allow them to pay that loan back?

CAROLYN DONALDSON: And that is happening.

Dr. Li, you are on the frontlines of this with your researchers, with your students.

Your thoughts?

QI LI: So I very much agree with Dr. Ghadar.

So we work for the university.

We get sort of paid from the tuition that students pay the university.

So we benefit the higher cost of higher education in the United States.

But I do think that in a lot of countries, developing or developed, the cost of higher education is much cheaper and the quality maybe is worse than that of US but may not be necessarily worse in terms of quality per dollar.

So in that sense, the cost of higher education in the US is the one thing that contributes to larger student debt.

But I think it's hard to solve, because so much embedded interest in there.

And it's unrealistic for the government, federal or state, to take up the responsibility of funding the public education entirely.

Even Penn State, we don't get a lot of funding from the state government and we rely a lot on tuition and generous donations from our alumnus.

The government funding only constitute a very small part of the University's budget.

CAROLYN DONALDSON: Yeah.

People in the world of academia have a tough job ahead of them in and out, in the public and private sector.

Hey, we've got to move on to unemployment, because I've got to touch on that.

A very important part of the economy.

So right now we're seeing the numbers that unemployment is down, so employment is up.

But tech companies and other industries are still seeing layoffs.

I read it every day.

Can you shed some light on why those industries in particular are seeing layoffs?

And here we'll look at a graph of how total employment is in the different sectors of our economy.

Dr. Ghadar, do you want to start that and let us know what your thoughts are on employment?

And then immigration, if you can touch on that.

Because I know that is something that you both have done great research on and talk about how we might be able to help employment and the economy with the immigration issue being key.

FARIBORZ GHADAR: Sure.

If you look at the job market, would you like me to talk about-- let me talk about the immigration issue and then I'll look at the Silicon Valley question that you asked.

Our immigration is bimodal.

In other words, we have a group of people who are highly skilled and want to come here and become a doctor or IT expert, et cetera.

And then we have a large group that's basically not skilled in the traditional workforce that we want.

In terms of the unskilled one, if you look at where they end up with, some 80% of workforce in the agricultural community are immigrants.

So the person who plucks the feather from the chicken you eat or the one who picks the apple from the tree, et cetera.

There's a big chart.

Or the guy who paints your house, et cetera.

We have shortages in that category.

CAROLYN DONALDSON: Let's look at some graphs here, if you can, Dr. Ghadar, as you're talking about this, because it visually kind of helps me understand what your points are here.

So this one, if you can walk us through these graphs.

FARIBORZ GHADAR: So this is the percentage of the US labor force that is foreign born.

And that's the definition of immigrants.

And you look at it, it goes from 15% to 18%.

But that is sort of an aggregate number.

If you go into agriculture, it's 80%.

If you go into even doctors and nurses, it's between 25% and 30%.

If you go into the IT area, it very much depends on what IT area you're talking about.

In the biotech, it's quite high.

And if you look at biotech, nobody's being laid off.

And if they get laid off, they immediately get hired somewhere else.

If you are in cybersecurity, you won't get laid off.

And if you get laid off, you open up your own store.

If you look at artificial intelligence, there's a huge shortage of skills.

But there's traditional IT jobs that are basically no longer needed as much as before.

And so they've been-- but those guys can-- and those guys and gals can quickly reposition themselves and go into the market.

CAROLYN DONALDSON: So some of the fluctuation that we're seeing in the tech industry with what we're calling layoffs, they're retraining, retooling, and going into a different speciality within tech.

FARIBORZ GHADAR: That is so.

That's exactly the case.

And the difficulty is those sectors of the economy really need immigrants, but they can't get enough H-1B visas.

These are the visa category for highly skilled people to come in.

So companies like Microsoft, et cetera, have to set up operations in Canada, in Vancouver or something like that, because the Canadians give those kind of visas much, much quicker and a lot more.

So Microsoft is in Seattle, but they got a big operation in Vancouver.

So when we talk about unemployment, it's what sector are we talking about.

Again, service sector.

If you want to go and serve in a restaurant, you can get hired immediately.

CAROLYN DONALDSON: Absolutely.

FARIBORZ GHADAR: The question is, do you want to go and serve in a restaurant?

And if the answer is no, then who's going to do it?

And if you don't let immigrants come in, then you'll get poor service in the restaurant and it's going to be expensive, which is what is happening.

The service sector costs are going higher.

So-- [interposing voices] CAROLYN DONALDSON: Can't have both.

I hate to interrupt.

And we've had such a lively discussion.

We've only got about three, three and a half minutes left, so we want to get to the last question, because we want to leave on an upbeat note, we hope.

So we want to end with each of you looking at which of those indicators that we've talked about, or maybe some we weren't able to discuss, will you be keeping an eye on for this year of insight as to where we're headed?

And I'd like to start real briefly, and again just about a minute, minute and a half, Dr. Li, would you be able to begin that?

And then Dr. Ghadar please.

QI LI: Yeah, I'll be very brief.

I'm mostly looking into two indicators.

The first one is about consumer spending.

Like I mentioned earlier, there is a little bit of early sign of weakening in consumer spending.

But it might be just a transitory thing.

But I'll definitely keep an eye looking for it.

And another area that I want to keep watching for is the inflation.

Because the future dynamics of inflation will very much determine Fed's chosen path of interest rate.

And the interest rate stance of the Fed will also feed that into house prices, stock market, consumer spending, and so on, and so forth.

I'm pretty positive that we will see a further decline in future inflation rate in the next few months.

But still, I'm going to keep looking into the future data.

CAROLYN DONALDSON: Very insightful.

Thank you.

We look forward to more research.

And Dr. Ghadar, again, you've been with us now two years.

What will you be looking for and can we can we end on an optimistic note?

FARIBORZ GHADAR: Absolutely.

I believe that the economy is in good shape.

I believe that GDP is growing.

I think wages are growing faster than inflation.

And hopefully we will catch up from the hole that we dug ourselves during the pandemic.

My worry is that inflation has not been stomped out.

Most recent data indicates that it's still pretty-- it's not very high.

It's in the 3, 3.2, 3.3%.

But that's still high.

And if that results in the Federal Reserve keeping the market tight and interest rates go up, I'm afraid we may overplay our hand and get a very slow inflation.

I'm sorry, a slow growth and an inflation.

And as you get older, you remember the stagflations of the past, and you certainly don't want that.

But I'm optimistic that won't happen.

But those are the numbers that I'm looking at very carefully.

CAROLYN DONALDSON: OK.

Thank you so much for both of your very insightful economic information.

We also did not touch on this being, of course, a very political and presidential election year.

So we know that that will play into it.

But we wanted to look at the numbers and the reality and the perception.

And we thank you so much for your insight.

Our guests tonight have been Dr. Fariborz Ghadar and Dr. Qi Li.

I'm Carolyn Donaldson.

We thank you so much for watching and listening to WPSU's a conversation on the state of the economy.

And please do join us again on March 21st for conversations live, another important issue, media literacy.

Have a great night.

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