LEILA FADEL, HOST:
Let's get a read on the latest economic numbers from someone who knows them well. Mark Zandi is chief economist at Moody's Analytics. Good morning, Mark. Welcome back to the program.
MARK ZANDI: Good morning, Leila. Good to be with you.
FADEL: So this new data indicates that consumers have been able to keep spending, even though their wages aren't keeping up with inflation. How long do you think this can last if disposable income isn't going up?
ZANDI: Not much longer. I think it's going to be pretty tough. I mean, real - that's after inflation - disposable after-tax income has gone nowhere over the past year, and that's for the typical American household. You can imagine, for about half the population, it's actually declining. And consumers, households have been able to mitigate that impact on their spending by drawing down on their saving rate.
FADEL: Yeah.
ZANDI: The saving rate is now about as low as it's ever been. So, you know, the economics of that are pretty tough, and I don't think that can be sustained for very long. So unless we see job growth pick up, unless we see wage growth start to reverse itself, unless we see inflation start to come in, I think we're going to see a much weaker consumer and a much weaker economy.
FADEL: Is it a cost concern that people are pulling their savings, putting things on credit cards?
ZANDI: Oh, of course. Yeah. I mean, and it's particularly low- or middle-income households. I mean, Scott made the point that, you know, for higher-income households, high net worth households, the well to-do, no problem. You know, they've got a job. Wage growth is fine. They own stocks, and, of course, the stock market's been doing very well because of artificial - the artificial intelligence companies. So they're doing fine.
But low- or middle-income households, it's a real tough time, particularly for lower-income households, obviously. The - they're inflation rates are so high, it's cutting into their ability to continue to spend. So they have been drawing down the saving, and they have been using their credit cards and other sources of financing to kind of keep things going. But now with interest rates, that gets tougher too. So, you know, it really depends on where you are kind of in the income distribution. But for most Americans, it's a pretty tough time.
FADEL: You mentioned the stock market. So I've got to ask. I mean, President Trump talks about how high the stock market is a lot. Job numbers and unemployment are also stable, but is his confidence shared by many Americans?
ZANDI: Well, for most Americans, they don't own much in - of any stock. I'll give you one statistic, Leila. The folks in the top 10% of the income distribution, so to be there, need to make about 225K a year, so you got to make over that. Those folks, they own 90% of all the stocks.
FADEL: Wow.
ZANDI: You know, half of Americans don't own any stocks. And, middle - you know, middle-income Americans, they own some stocks in their 401(k), but it's really small in the grand scheme of things. And their biggest asset is not their stock portfolios, it's their home. And, of course, home values have gone nowhere the last three or four years. So, yeah. I mean, the stock market, I'll take it. You know, that's great. And AI is key to keeping the economy together as well as its being kept together. But the benefits of that are accruing to a small group of Americans. It's - at least up to this point in time.
FADEL: What direction do you see the economy headed in? Will growth continue to slow, or will there be a rebound?
ZANDI: Well, I'll give you an economist's answer. Unfortunately, it depends, right? It depends on the war. It...
FADEL: You can't just say yes or no?
ZANDI: Yeah. I wish I could. I mean, you know, it depends on what's going on in the Middle East. I mean, if the war continues to drag on, it means higher energy costs. That's going to become - that's already a big deal. You know, the typical American has shelled out 1,250 bucks to pay for this war through higher energy costs, higher interest rates and the military costs. So it's already...
FADEL: Right.
ZANDI: ...Adding up to a lot. So if that continues, we got a problem. You know, hopefully, this thing, we find a - the administration and the Iranian regime find a way to allow this thing to wind down and get oil flowing again and oil prices down definitively because if we don't, as we go into the end of the year next, I think it's going to be a pretty tough environment.
FADEL: Mark Zandi is chief economist at Moody's Analytics. Thank you, Mark.
ZANDI: Thank you, Leila.
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