Truflation, CPI Surprise, and Data Signals

In this episode, Danielle DiMartino Booth, CEO of QI Research and former Fed insider, calls the Federal Reserve "borderline cruel" after FOMC minutes revealed several participants wanted rate hikes despite Americans' financial wellbeing hitting record lows. Danielle argues we're already in a labor market recession that "won't be acknowledged for years but is undeniable to the people who are in it," pointing to unprecedented data: 12 consecutive months of negative payroll revisions, 419,000 net job losses when excluding education and health services, seasonal adjustment anomalies adding 140,000 phantom jobs in January, and unemployment survey response rates at record lows making the data unreliable. She highlights that Truflation shows inflation at just 0.7% while the Fed maintains hawkish rhetoric, that 52% of college graduates are underemployed with another graduating class arriving in two months, and that AI is destroying entry-level jobs in finance, accounting, and architecture without any retraining programs in place. Danielle warns about the societal implications of Gen Z and millennials (52.5% of voters) increasingly using buy now pay later for basic necessities like medical bills and utilities, while others use it for vacations with no intention of paying it back. She questions whether Kevin Warsh will hold to his stated principles about shrinking the Fed's balance sheet or cave to market pressure like Powell did in 2018, and reveals that Fed governor Michael Barr is already hinting at expanded social safety nets or UBI to address AI-driven unemployment. Danielle refuses to "gaslight Americans" about the economy and emphasizes the urgent need to think about retraining workers and the societal implications of mass youth unemployment.

Links:

Danielle's Twitter/X: https://twitter.com/dimartinobooth

Substack: https://dimartinobooth.substack.com/

YouTube: https://www.youtube.com/@DanielleDiMartinoBoothQI

Fed Up: https://www.amazon.com/Fed-Up-Insiders-Federal-Reserve/dp/0735211655

Timestamps:

0:00 Welcome back Danielle DiMartino Booth

0:52 FOMC minutes: Several participants want rate hikes

1:46 Americans' financial wellbeing at record lows — the disconnect

3:31 Truflation at 0.7% — what the Fed is missing

5:27 What's the Fed missing on the labor side?

7:06 Labor recession in plain sight — concentrated in non-cyclical sectors

8:28 Buy now pay later for medical and dental bills

9:32 Gen Z and millennials: Taking on debt with no intention to pay

11:00 A revolt against the system?

12:15 The Fed didn't listen to your open letters

13:40 Rate hike talk while small business borrowing costs are "prohibitively tight"

14:59 Fed being sanguine on credit delinquencies

16:14 What would be the responsible thing for the Fed to do?

17:12 "It's getting personal" — Americans worried about losing their own jobs

18:02 52% of college graduates are underemployed

18:42 Is this AI or just an excuse?

20:08 What happens in 2028 if the pendulum swings?

21:32 Kevin Warsh — will he stick to his principles?

24:01 Is the Fed too beholden to the market?

25:15 Unemployment survey response rate at record lows

27:23 Base case for the economy — labor market recession continues 28:56 What keeps you up at night and what makes you hopeful?