I LOVE YOU, AMERICA.

THANK YOU AND LET'S GET TO WORK!

>> CATHY: DEMOCRATIC REPRESENTATIVE DEAN PHILLIPS WAS NOT THE ONLY MEMBER OF MINNESOTA'S CONGRESSIONAL DELEGATION IN THE NEWS THIS WEEK.

SIXTH DISTRICT REPUBLICAN CONGRESSMAN TOM EMMER WAS THE NOMINEE FOR HOUSE SPEAKER FOR ABOUT FOUR HOURS ON TUESDAY BEFORE WITHDRAWING WITHOUT A FLOOR VOTE.

MARY LAHAMMER WILL HAVE MORE ON REPRESENTATIVE EMMER A LITTLE LATER IN THE SHOW.

WE'RE GOING TO HEAD OVER TO THE OTHER SET.

WE'LL BE RIGHT BACK.

♪♪ >> ERIC: HOW ARE CONSUMERS FEELING ABOUT HIGHER PRICES, INTEREST RATES, AND THE CONTINUED FEAR OF RECESSION IN THE U.S.?

BY SPENDING ENOUGH MONEY IN THE LAST THREE MONTHS TO SEE THE ECONOMY EXPAND AT A 4.9% RATE, THE FASTEST PACE IN ALMOST TWO YEARS AND MORE THAN DOUBLE THE PREVIOUS THREE MONTHS.

JUST HOW STRONG IS THE ECONOMY AND HOW CONFIDENT ARE CONSUMERS AS THE HOLIDAY SEASON AND END OF THE YEAR APPROACH?

OUR NEXT TWO GUESTS CAN ANSWERS THESE TWO QUESTIONS, AND MUCH MORE.

LOUIS JOHNSTON TEACHES ECONOMICS AT THE COLLEGE OF ST. BENEDICTS AND ST. JOHN'S UNIVERSITY.

JEANNE BOEH TOILS AWAY IN THE ECONOMICS DEPARTMENT AT AUGSBURG UNIVERSITY.

CONSUMERS ARE DRIVING THE BUS HERE A LITTLE BIT?

>> THEY ARE, BUT THEY'RE A LITTLE IT RUNNING OUT OF STEAM.

>> Eric: SAY MORE ABOUT THAT.

>> SO, OF THE 4.9, 2.7% WAS CONSUMER SPENDING BUT THEIR SAVINGS HAVE GONE DOWN AND THEY'RE SORT OF RUNNING OUT OF STEAM THAT WAY.

THE SAVINGS RATE IS BELOW WHAT IT WAS AND INTEREST RATES ARE GOING HIGHER SO WE WERE HAVING THIS CONVERSATION BEFORE, THE AUTO DELINQUENCIES ARE GOING UP ND THAT'S BECAUSE IF YOU'RE UYING USED CARS, YOU CAN BE EXPECTING TO PAY AN INTEREST RATE OF 14 TO 20%, LIKE BUYING A CAR ON CREDIT CARDS.

>> Cathy: OH, SAY, SPEAKING OF CREDIT CARDS, SO ARE CONSUMERS -- THEY'RE SPENDING AS YOU SAY THEY'RE RUNNING OUT OF STEAM BUT ARE THEY PUTTING STUFF ONLY CREDIT CARDS?

>> SOME OF THEM ARE PUTTING STUFF ON CREDIT CARDS.

>> IT IS STARTING TO GROW AND THE OTHER THING IN THE GDP REPORT THAT NOTICE WITH THIS, GDP CALLS SOMETHING CALLED INVENTORY INVESTMENT WHICH IS BUSINESSES PRODUCE STUFF BUT NOBODY BUY IT.

THAT GREW LAST QUARTER BUT I THINK A POINT AND A HALF OF THE 4.9%, SO THAT MEANS THEY'RE PRODUCING STUFF, PEOPLE WERE BUYING IT BUT NOW MAYBE NOT.

>> Eric: JUST IN TIME FOR THE HOLIDAY GIFT-GIVING SEASON.

>> YEP.

>> I THINK THEY'LL -- EVERYONE -- MOST PEOPLE EXPECT THE CONSUMER SPENDING TO SORTS OF DAMPEN DOWN, RIGHT?

AND SO THEY'RE NOT EXPECTING THAT RATE OF GROWTH IN GDP TO CONTINUE BUT HOPING FOR A SOFT LANDING SO THEY DAMPEN DOWN A LITTLE BIT BUT HE INTEREST RATES ARE AFFECTING HOUSING AND CARS.

>> Cathy: SOME PEOPLE ARE STILL TALKING ABOUT A RECESSION.

WHAT DO YOU TWO THINK?

>> I'M NOT.

>> Cathy: HAT WAS A DEEP SIGH.

>> I'M NOT.

I GUESS I WAS THINKING ABOUT THIS TODAY, I DIDN'T HAVE A CHANCE TO GO BACK AND LOOK AT THE TAPES BUT I DON'T THINK I EVER PUT MORE THAN A ONE-FOUR CHANCE ON A RECESSION FOR THE LAST YEAR AND I STILL -- I JUST DON'T SEE THE ODDS THAT HIGH.

NOW, YOU KNOW, SOMETIMES WE HAVE TERRIBLE THINGS HAPPENING IN THE MIDDLE EAST, A WAR IN UKRAINE, THESE THINGS COULD BLOW UP AND THEY ALREADY HAVE IN CERTAIN WAYS, OBVIOUSLY, BUT I JUST DON'T SEE A RECESSION HAPPENING RIGHT NOW.

>> I THINK THE ODDS ARE STILL LIKE 60% THAT WE WON'T HAVE A RECESSION BUT THE PROBLEM IS ALL THIGHS UNKNOWNS, RIGHT?

SO OIL PRICES HAVE ALREADY STARTED TO GO UP, AND THAT FEEDS INTO INFLATION, RIGHT?

THAT FEEDS INTO WHY CONSUMERS THINK THAT THEIR AFTER-TAX INCOME OR AFTER-PRICE INCREASES INCOME ARE GOING DOWN BECAUSE THEY ARE, RIGHT?

AND SO I WAS TELLING LOUIS THAT THERE WAS AN ARTICLE IN THE "WALL STREET JOURNAL" THIS WEEK THAT SAID 899 KETCHUP IS DRIVING CONSUMERS CRAZY, AND IF OIL GOES UP, THAT AFFECTS EVERYTHING BECAUSE THERE'S IT IS LAST MILE PROBLEM, THEY HAVE TO GET IT TO THE GROCERY STORE.

>> Eric: WITH THE FED NOW LOOKING AT THE CURRENT SITUATION, I THINK YOU TWO HAVE TAUGHT US THAT ACCELERATED GROWTH MEANS HIGHER INTEREST RATES.

>> WELL, THE IDEA IS THAT ACCELERATED GROWTH SUPPOSEDLY CAUSES HIGHER INFLATION AND SO YOU HAVE TO USE IT TO PUT ON THE BRAKES.

THE PROBLEM IS THEY'VE PUT ON THE BRAKES AND WE STILL HAVE REALLY RAPID GROWTH.

AND INFLATION IS COMING DOCUMENT.

NOW, WAIT, THIS ISN'T SUPPOSED TO WORK THIS WAY AND SO THAT'S WHAT'S KIND OF CONFUSING, I THINK, A LOT F PEOPLE AND SO THE FED IN A SENSE HAS DECIDED, WE'RE JUST GOING TO PAUSE.

WE'RE JUST GOING TO HOLD STEADY HERE, THEY DID IT LAST MEETING.

I THINK THEY'RE GOING TO DO THAT THIS MEETING.

THE BIG QUESTION IS, IS THAT GOING TO CONTINUE INTO THEIR DECEMBER MEETING?

>> Cathy: WHAT'S EXACTLY -- WHY IS IT -- WHY AREN'T WE SEEING WHAT YOU WOULD NORMALLY SEE AS ECONOMISTS?

I MEAN, WHAT'S -- WHAT'S CHANGING HERE?

>> BECAUSE THERE WAS LEFT OVER MONEY FROM THE COVID, SO PEOPLE -- PEOPLE HAD BUILT UP SAVINGS AND SO THEY ERE SPENDING DOWN THAT SAVINGS AND THAT WAS AN ABNORMAL.

THE PROBLEM IS, THE PROBLEM IS, THAT WE HAVE SO MANY UNKNOWNS, RIGHT?

SO MAYBE THE MIDDLE EAST WE CAN KEEP IT INTO, YOU KNOW, A CONTAINED WAR, IF WE START HAVING A BIGGER WAR, LIKELY TO CAUSE PROBLEMS.

>> ALSO OUR MODELS ARE BUILT ON WHAT HAPPENED THE IN HE IS PA. WE JUST HAD A CONFERENCE TODAY FOR THE MINNESOTA ECONOMIC ASSOCIATION AND A NUMBER OF THE SPEAKERS WERE TALKING ABOUT HOW THINGS CHANGED IN THIS PANDEMIC.

PEOPLE ARE WORKING FROM HOME IN A WAY THEY WEREN'T BEFORE.

THEY'RE WORKING DIFFERENT HOUR PATTERNS AND THINGS LIKE THAT.

YOU KNOW, THOSE MODELS MAY NOT BE AS ACCURATE NOW AS THEY WERE BEFORE.

>> Eric: CONSUMERS, 75% OF THEM SURVEYED SAID THEIR COSTS HAVE GONE UP IN THE LAST YEAR.

>> I THINK THAT'S ACCURATE.

>> Eric: IS THAT WHY THE ROSIE ICTURE AT 30,000 FEET ON THE GROUND ISN'T AS ROSIE FOR FOLKS?

>> SO WE ERE HAVING A CONVERSATION BEFOREHAND THE FED USES PCE, PERSONAL CONSUMPTION EXPENDITURES AS THEIR INFLATION INDEX BUT THE CPI IS OUT THERE, TOO, SORTS OF THE MARKET BASKETS AND THE CPI IS UP MORE THAN PCE IS AND SOMETIMES EVEN WHEN YOU LOOK AT THE INFLATION, THEY SAY, WELL, EXCLUDING, YOU KNOW, FOOD AND ENERGY, WELL, THOSE ARE A LARGE PERCENTAGE OF WHAT THE AVERAGE PERSON IS SPENDING THEIR MONEY ON, PARTICULARLY LOWER INCOME CONSUMERS.

>> Eric: IS THERE A HOUSING COMPONENT HERE IS THAT IS GOING TO BE A BELLWETHER FOR THE ECONOMY GOING FORWARD?

>> A LITTLE BIT.

WITH INTEREST RATES GOING UP, IF YOU'VE SEEN OVER THE LAST COUPLE OF WEEKS, INTEREST RATES AROUND FEDERAL DEBT HAVE GONE UP AND THAT'S BEEN DRIVING MORTGAGE RATES UP SO THAT'S AFFECTING THE ABILITIES OF PEOPLE TO GO OUT AND BUY BOTH NEW HOUSES AND EXISTING HOUSES, SO I AM CONCERNED ABOUT THAT BECAUSE THAT RIPPLES THROUGH TO CONSTRUCTION.

>> Eric: THAT'S ONE OF YOUR SPECIALTIES, FOCUSES.

>> ONE OF THE ISSUES IS SOME OF THE LARGE HOUSING BUILDERS ARE SUBSIDIZING INTEREST RATE.

THEY'LL SAY, O YOU SAY IT'S 7%, WE'LL GIVE IT AT 5.75, WHICH IS WHY THE NEW HOUSING HASN'T FALLEN AS MUCH AS YOU WOULD EXPECT IT TO BUT FOR SORT OF RESALES.

WELL, THERE'S -- NOBODY'S GETTING THAT, AND SO MANY PEOPLE HAVE THE LOW INTEREST RATE, AS THEY SAY, THEY'RE KIND OF STUCK.

>> Cathy: SAY, LETS ME ASK YOU TWO ABOUT THE BIG STORY THIS WEEK ABOUT FORD AND THE U.A.W.

HAVE A TENTATIVE CONTRACT AGREEMENT.

A 25% OVER 4.5 YEARS.

WHAT DOES THAT SAYS TO YOU?

>> THAT SAYS THAT FORD THINKS THINGS ARE GOING TO BE PRETTY GOOD OVER THE NEXT FEW YEARS, OTHERWISE THEY WOULDN'T WANT TO TIE THEIR HANDS THAT WAY.

ON THE OTHER HAND, THAT'S NOT AS MUCH AS THE U.W.A.

WANTED, I THINK THEY WANTED 40%.

THEY BOTH RECOGNIZE THEY HAVE TO GET ALONG TO DO THIS.

WHAT I KEEP WONDERING IS, WHY HAVEN'T G.M.AND STILANTIS GO ALONG WITH HAT.

>> Eric: USUALLY THEY WOULD GO ALONG WITH THE OTHER ONE.

>> I HAVEN'T HEARD WHY.

>> Cathy: WHAT DOES THAT SAY ABOUT THE STRENGTH OF UNIONS NOW?

>> WELL, I THINK THAT UNIONS -- IF YOU LOOK AT WAGE GROWTH OVER THE LAST YEAR, SOME OF THE STRONGEST WAGE GROWTH HAS BEEN IN GOVERNMENT AND GOVERNMENT IS WHERE A LOT OF THE UNION EMPLOYEES ARE AT THIS POINT.

>> Eric: WAGES KEEPING UP OR -- >> THEY'RE DOING PRETTY GOOD.

IT DEPENDS ON WHERE YOU ARE IN THE INCOME DISTRIBUTION.

CERTAIN PARTS OF THE DISTRIBUTION ARE DOING FAIRLY WELL.

OTHERWISES, YOU GET A WAGE INCREASE AND THAT 8.99 KEVIN UP COMES ALONG AND WIPES IT OUT.

>> Eric: SO RETAILERS MAY NOT HAVE A HO, HO, HO HOLIDAY SEASON.

>> I THINK THE RETAIL MARKET IS REALLY STRUGGLING RIGHT NOW.

IF YOU LOOK AT SHOPPING CENTERS AND THINGS LIKE, THAT PEOPLE JUST AREN'T GOING OUT AND SHOPPING.

SO MUCH OF IT IS ONLINE AND IF YOU LOOK AT, LIKE, THE DOWNTOWNS, SOME OF THE, YOU KNOW -- THEY'RE PRETTY EMPTY.

>> Cathy: GOOD TO SEE YOU AS ALWAYS.

>> Eric: I HEAR THE BELL.

CL