Interviewer (2:18)

Jobs is key. Is it jobless growth, so called jobless growth?

Nouriel Roubini (2:22)

Yeah. Well, is it jobless growth? There are three stories. One is that the GDP number are wrong and the GDP number are going to be revised towards the weaker labor numbers. The other one is that no, the GDP growth is strong and you're going to have some adjustment upward of the revised data. I think the third explanation is the more correct one. You can have strong GDP growth and having weak labour growth because we're having a productivity revolution. If you're looking for example at the revenue, real revenue per worker of S&P 500 firms since the launch of Chat GPT in November 2022, the average has increased for S&P 500 firms by 15% in the last three years. So it's almost 5% per year. And if you look at the by sector, of course, a lot of it is closer to 20% in tech and communication services, but it's very large also across the board. So both at the micro data level, S&P 500 firms in the macro number, we are seeing a productivity revolution already in the numbers.

Podcast Host (3:20)

I'm kind of dealing with whiplash right now because we just had the Ryan Mattel CEO on defense sector in Europe booming for all the wrong reasons. This idea that he's more worried about the state of the world than ever before. And here Dr. Doom is coming on. Tell us about how productivity boom is going to bring everything to a better place. Why are you less concerned about this overlay of rearmament and militarization that is also coming in tandem with this productivity boom?

Nouriel Roubini (3:47)

Well, there are geopolitical risk in the world and I'm aware of them. The question is whether they're going to have a significant economic and market effect. Look at the biggest one. You had a 12 day war between Israel and Iran last June. Oil price went up a little bit, stock markets wobbled. And then given that Iran did not attack the old facility of the Gulf or block the street of Hormuz, it went away. And that was a big, big deal. Venezuela, you know, we can discuss it at length, but the macro and market implications are close to zero. It's just less than a million barrels a day. Russia, Ukraine is a mess, but it's not going to have an impact on global market economy the way it did in 2022. So. And US, China, they are of course in a competitive strategic competition. But right now the trade tension, for all the reasons we know, are somehow limited so every time there is a geopolitical risk, people say stuff could happen. But so far those that we have seen the last few decades, leaving aside the 70s with the shocks of Yom Kippur and the Islamic revolution, have another market effect.

Podcast Host (4:52)

Do you think though that the United States is going to lose some of its luster as an investment haven't in terms of the ongoing conflict between the US and traditional allies like Europe? I mean, have you seen anything like that? Or do you think that's overstated and productivity really is going to rule the roost?

Nouriel Roubini (5:06)

You know, I've been saying since last year that tech trumps tariffs because I think that the upside coming from tech is 200 basis points. While if you add all the impacts of the bad stagflationary policies of Trump trade, the restrictions of migration, fiscal deficit, trying to affect the independence of the Fed rule of law, the maximum from a empirical point of view could be a negative 50 basis points. Downside to potential growth. So you have an upside of 200. From technology, you have a downside of 50 is a ratio 4 to 1. So tech trump startup. So the stuff that these technologies first order, everything else, including geopolitics, is second order.

Podcast Host (5:44)

Is this why the trade? The market pretty much shrugged off at independence yesterday as a serious concern?

Nouriel Roubini (5:52)

You know, I, I believe that, you know, there is some frothiness of course in the sector, but if you talk to all these companies, I think that they would all argue that we are maybe at worst 5 years away or at best 3 years away from AGI, however you want to define it. Now, if we are achieving artificial general intelligence, the valuation of the, say of not every of the max seven is going to reach AGI, but maybe three or four will. So the value of a firm that is going to be having AGI is going to be 5x of its current value. So that's the race. So if you think of it this way, yeah, there is some frothiness. There can be a correction. But with US growth at 2% for the last few decades, the average return on S&P 500 was 12%, including dividends of that of NASDAQ was 16% and also with 2%, suppose growth is not to 3, let alone 3 and a half, 4, American exceptionalism has to become even stronger. Because if it was American exceptional with 1.8% growth, with higher growth, it has to be better than that on average. Now there'll be winners and losers, both within publicly traded firms, all the economy versus new economy and among the startups Many of them are going to go bust. But if you're looking at the medium term horizon with higher growth, you got to have higher returns. And we're seeing based on the data on real revenue growth for Sigma 500 firms, that most of those productivity gains are gotten by the firms. Real wages are growing less than productivity. Unilever costs are falling. That's why there is malaise. There's why people are worrying about affordability. But from a profitability point of view, the corporate sector is doing great.

Interviewer (7:27)

It's perfect framing of the last year and maybe for the next several years. Thank you, sir. It's good to see you as always. Thank you. Nuri Robini there, Roubini Macro Associates.

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