Odd Lots Podcast Summary

Episode: Kansas City's Fed President on What Everyone Will Be Talking About at Jackson Hole
Date: August 21, 2025
Hosts: Joe Weisenthal and Tracy Alloway
Guest: Jeff Schmidt, President of the Kansas City Fed

Episode Overview

This episode explores the key themes and anticipated topics of the Federal Reserve’s annual Jackson Hole Economic Symposium, with a particular focus on the future of labor markets, demographics, technology (especially AI), and the current stance and challenges of monetary policy. The hosts are joined by Jeff Schmidt, President of the Kansas City Fed (the hosting institution for the event), for an insider's look at planning the symposium and a substantive discussion on central banking, labor shifts, economic data, and the evolving global landscape.

Key Discussion Points & Insights

1. Behind the Scenes of Jackson Hole and Theme Selection

• Theme for 2025: “Labor Markets in Transition: Demographics, Productivity, and Macroeconomics” (03:00–03:34)

  • Chosen for its timeliness amid shifts from AI, immigration changes, aging populations, and fertility trends.
  • Reflects not only U.S. issues but also global demographic transitions.

• Process for Deciding the Theme (04:41–06:32)

  • Starts almost immediately after the prior symposium.
  • Pressure to anticipate issues that will stay salient eight months out.
  • "You've got Nobel level economists doing the research and preparing these papers around a topic. And I think this one is really going to hit a really good chord." — Jeff Schmidt (06:20)

• Selecting Presenters (07:15–08:53)

  • Care taken to identify top experts; highly competitive but also aligned to ongoing research.
  • Tight research and prep windows (4–5 months), making it challenging despite high interest.

2. Labor Markets in Transition: AI, Aging, and Immigration

• Jeff Schmidt’s “Practitioner” Perspective

  • Emphasizes workforce management and HR trends from his banking experience.
  • Sees two major drivers:
    1. Behavioral changes by generation in workforce expectations and technology adoption.
    2. Global fertility and migration trends shaping labor supply.
  • "The most important part of that is really the workforce of people that you put together." — Jeff Schmidt (09:33–12:57)

• AI’s Impact

  • Potentially well-timed to offset stagnating or shrinking labor growth in major economies.
  • Major productivity advances from AI may take time, as organizations are still integrating “low-hanging fruit” solutions.
  • "Be patient. You know, a lot of things are happening. I think a lot of this technology is emerging now. Now granted it'll go fast, but the adoption...I don't know if you're going to get this blast of productivity that all of a sudden it's this moment of epiphany." — Jeff Schmidt (15:05)

• Comparing Tech Change to Productivity Gains

  • Despite radical improvements (e.g., from the first iPhone to now), measured productivity growth remains muted.
  • AI could potentially shift this, especially for “soul-sucking jobs.” (Credit to Mary Daly, 15:05–18:04)

3. Current Labor Market Data & Outlook

• Indicators and Uncertainties (18:44–21:03)

  • Labor market impacted by broader policy uncertainty, shifts in immigration, and business decision-making slowdowns.
  • Regional business surveys suggest stabilization and renewed confidence in coming quarters.

• Sectors Driving Job Growth

  • Healthcare and social assistance consistently add jobs, reflecting aging population demands, but these are not high-productivity fields.
  • "There is still a huge demand need in that sector...there are pockets by industry that could still use a lot of labor talent." — Jeff Schmidt (24:00)

• Reskilling and Industry Transformation (24:55–26:11)

  • Emphasizes the need for ongoing workforce reskilling in response to tech advances.
  • "You can't be static in the job you're doing. You have to reimagine that job with new technologies." — Jeff Schmidt (25:55)

4. Monetary Policy: Rates, Restrictiveness, and the Neutral Rate

• Are Rates Restrictive? (26:49–29:26)

  • Schmidt characterizes rates as “modestly restrictive,” not overly so.
  • Markets and borrowers accustomed to very low rates; there’s a need to “rebase” expectations to more normalized levels.
  • "It almost becomes more difficult in the debate on rates whether they should be higher or lower when you're at the margin versus when you're trying to use monetary policy as more of a blunt force instrument..." — Jeff Schmidt (28:39)

• The Neutral Rate (R) Debate* (29:26–32:36)

  • Neutral interest rate appears durably higher than pre-pandemic, with influences from inflation expectations, fiscal demand, and Fed policy.
  • Dissent about term premiums in long rates: "I don't know if I believe in it, but I think there are pieces of a long rate that have sections of it that the market is going to try to digest." — Jeff Schmidt (30:28)

5. Fed Independence and Political Pressure

• Rising Attacks on Independence (33:34–34:49)

  • Discussed as a subtext at Jackson Hole.
  • Concerns that a less independent central bank could lead to higher long-term rates if market actors doubt the Fed’s inflation-fighting resolve.

• Schmidt Frames the Fed’s Role Metaphorically (34:51–36:37)

  • "The Fed is not the train. The Fed is actually the rails...to me to think about the two rails being, you know, stable prices and, and full employment."
  • Independence is vital, but policy decisions’ effectiveness is ultimately judged on their ability to keep the economy “level.”

• Steps to Demonstrate Independence (37:34–39:44)

  • Structural safeguards in governance help, but transparency and adherence to data-driven decisions are essential for public and market trust.
  • Emphasizes the balance of regional and national perspectives on the FOMC.

6. Dissent on Fed Decisions and the Internal Policy Process

• Why Dissents Are Rare (39:44–42:21)
  • Healthy debate is present; dissents reflect meaningful policy disagreement at the margin more often than deference to the Chair.
  • "I think in a lot of ways, dissents are healthy...we're at the margin on things like the policy rate today. So the data could shift people's opinions one way, the other." — Jeff Schmidt (40:42)

7. What Would Trigger a Rate Cut? Data Watch

• Key Data Triggers (42:21–44:05)

  • Looking at inflation trends, labor supply/demand, and global perspectives gathered at Jackson Hole.
  • Current stance: “It just seems like we're in a pretty good place right now. But look, that data can shift and change..." — Jeff Schmidt (43:34)

• What’s Restrictive About Policy Today? (44:05–46:37)

  • Cites that the FOMC has already eased by 100bps over 12 months.
  • Stresses both caution (watching for inflation surprises) and comfort (economy and labor market “in a good place”).

8. Quantitative Tightening and Funding Markets

• Outlook for Bank Reserves and Liquidity (46:37–49:34)
  • Fed remains committed to “ample reserves” but is modernizing the discount window for more nimble liquidity management.
  • “The nature of how we move money instantly seven days a week, 24 hours a day...is going to be a very interesting dynamic and it's going to be necessary for the central bank to be accommodative to the immediacy of that money movement.” — Jeff Schmidt (48:40)

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote/Insight | |-----------|-------------------|----------------------------------------------------------------------------------------------| | 06:20 | Jeff Schmidt | "You've got Nobel level economists doing the research and preparing these papers... I think this one is really going to hit a really good chord." | | 09:33 | Jeff Schmidt | "The most important part of that is really the workforce of people that you put together." | | 15:05 | Jeff Schmidt | "Be patient. You know, a lot of things are happening. I think a lot of this technology is emerging now...I don't know if you're going to get this blast of productivity that all of a sudden it's this moment of epiphany." | | 25:55 | Jeff Schmidt | "You can't be static in the job you're doing. You have to reimagine that job with new technologies." | | 28:39 | Jeff Schmidt | "It almost becomes more difficult in the debate on rates whether they should be higher or lower when you're at the margin..." | | 34:51 | Jeff Schmidt | "The Fed is not the train. The Fed is actually the rails...stable prices and, and full employment." | | 43:34 | Jeff Schmidt | "It just seems like we're in a pretty good place right now. But look, that data can shift and change..." | | 48:40 | Jeff Schmidt | "The nature of how we move money instantly seven days a week, 24 hours a day...is going to be a very interesting dynamic." |

Timestamps for Key Segments

• Theme choice and inside baseball: 02:44–06:32
• Labor shifts and demographic drivers: 08:53–12:57
• Tech & productivity paradox: 15:05–18:04
• Current labor market outlook: 18:44–23:09
• Sectoral job trends & reskilling: 23:09–26:11
• Restrictiveness of rates: 26:49–29:26
• Neutral rate debate: 29:26–32:36
• Fed independence discussion: 33:34–39:44
• Fed internal dissent and process: 39:44–42:21
• Triggers for rate cuts: 42:21–44:05
• QT, funding markets, and banking modernization: 46:37–49:34

Tone

The conversation is collegial, energetic, and packed with both policy detail and “inside baseball” insights. Schmidt often offers analogies and direct, pragmatic observations from his career outside academia, making complex monetary topics relatable and concrete.

In Summary

This episode is an essential listen for anyone interested in the real-time dilemmas facing U.S. and global central bankers at a moment of major demographic transition, technological upheaval, and uncertain macroeconomic signals. It’s also an engaging curtain-raiser for 2025’s Jackson Hole Symposium, promising vigorous debate on labor, AI, productivity, and the vital importance (and vulnerability) of central bank independence.