Odd Lots Podcast Summary

Episode: Why Austan Goolsbee Is Still Concerned About Inflation
Hosts: Joe Weisenthal & Tracy Alloway (Bloomberg)
Guest: Austan Goolsbee, President, Federal Reserve Bank of Chicago
Date: August 23, 2025

Overview

This episode, recorded at the Jackson Hole economic symposium, features a timely and nuanced discussion with Chicago Fed President Austan Goolsbee. The conversation explores the state of the US economy in 2025, persistent inflation concerns, impacts of tariffs, labor market dynamics, and why Goolsbee maintains a cautious stance on rate cuts. The conversation provides first-hand insights into how a top Fed official is interpreting recent economic developments—and what keeps him watchful.

Key Discussion Points & Insights

1. The State of the Economy & Goolsbee’s Inflation Concerns

• Goolsbee describes the economic outlook as uncertain, with some indicators positive but recent data raising red flags—especially on inflation.
  • “As you know, I thought first Q1 coming into April it was looking pretty good... inflation... looked to me like it was heading, it was coming down... we had a couple of months of benign inflation numbers and then we got the last inflation number which is a little less benign and the rise of services inflation threw me for a little bit of a crosscurrent.”
    (Goolsbee, 03:46)
• Inflation remains his primary worry, particularly the resurgence in services inflation and the possibility that tariffs could prolong or worsen price pressures.
  • “I’d say inflation. I’m still thinking inflation... Now that we are seeing a couple of bumps and things ticking up, I fear we got to... think about that inflation side.”
    (Goolsbee, 07:58)

2. Labor Market Metrics: The “Four Horsemen of Truth”

• Goolsbee is wary of reading too much into payroll data due to population fluctuations (immigration in particular), instead focusing on four key metrics:
  • Unemployment rate
  • Hiring rate
  • Layoff rate
  • Vacancy rate
• “The four horsemen of truth and justice, in my view are rates. They’re less susceptible to the immigration and population labor supply problems… If you look at those rates, three of them still say this is basically full employment and it's looking fine.”
  (Goolsbee, 05:57)
• Despite softer payroll numbers, low layoffs and strong vacancies suggest continued labor market strength.

3. Tariffs, Supply Shocks, and Transmission to Inflation

• The discussion explores how tariffs have rattled key industries in the 7th District (Midwest manufacturing and agriculture), with initial panic receding but lingering structural worries.
  • “The 7th District... is the most manufacturing intensive of all the districts... in the run up to April 2 and through April 2 into May... their hair was on fire. I mean this is going to wipe us out... If anything's like the rates of what they just announced, the auto suppliers that we had small margins to begin with, we're going to die.”
    (Goolsbee, 21:05)
• Goolsbee warns that even if tariffs are theoretically ‘one and done’, real-world supply chain dynamics and repeated shocks mean they can sustain or reignite inflation.
  • “For the platonic ideal of a theoretical one and done tariff, it's just a one time price increase... This is not one and this is not done. So let's be a little more circumspect... We learned in Covid that if it's a big enough impact on the supply chain... that process takes a lot longer than we thought it would.”
    (Goolsbee, 24:51)

4. Services Inflation & Unexplained Price Pressures

• The panel discusses the concern that services inflation is strong despite little connection to tariffs, leading to uncertainty about underlying inflation mechanisms.
  • “One part. What if the services inflation is, isn't coming from tariffs? Okay, so that's the, the danger... you kind of can't really give a simple mechanism of why services inflation would be rising… It wasn't good.”
    (Goolsbee, 25:03)
• Unanchored expectations and the risk of a wage-price spiral remain dangers if consumers and workers assume inflation will stay high.

5. Monetary Policy: Rates, Market Expectations, and Cutting Debate

• Markets expect higher “terminal” rates versus pre-Covid times; Goolsbee suggests past ultra-low rates were the anomaly.
  • “If you asked historically which of those is weird? 2018, 2019 is what's weird. The long rates now look very similar to historical patterns.”
    (Goolsbee, 19:04)
• He hesitates on immediate rate cuts due to “flags” on inflation, but says stable employment could justify cuts if inflation resumes its downtrend.
  • “I don’t come to it averse to cutting of rates... but we've just got a couple of flags at the same time.”
    (Goolsbee, 07:30, paraphrased for clarity)

6. FOMC Dynamics and Decision-Making

• Joe’s recurring question: Why are dissents rare on the FOMC?
  • Goolsbee credits Chair Powell’s “hall of fame” leadership and his skill at uniting diverse views within the committee.
  • “He's been remarkably skilled at whether it's through statements, whether it's through like what's. What's written on the page that everybody... can agree. Yes, I agree with that and I think that's why there are fewer dissents.”
    (Goolsbee, 31:10)

Notable Quotes & Memorable Moments

• On the challenges of interpreting data in times of demographic shift:
  “At moments when there are population growth shifts... be careful using monthly payroll... pay less attention than you normally would.”
  (Goolsbee, 10:32)
• On consumer psychology and inflation:
  “Everyone's experienced inflation now... they're more amped up to see it... you see this consumer confidence numbers going down somewhat significantly.”
  (Goolsbee, 09:00)
• Fed independence and cohesion:
  “You can see from a minute... that's not true. People have different worldviews. [Powell] has been remarkably skilled... so that's why there are fewer dissents.”
  (Goolsbee, 31:10)

Important Segment Timestamps

• 03:46 – Goolsbee’s summary on the economy, inflation, and shifting indicators
• 05:57 – Introduction of the “Four Horsemen” labor market measures
• 07:58 – Primary focus on inflation over labor market
• 14:59 – Debate over whether current market conditions are restrictive
• 21:05 – Real-world impact of tariffs in the Midwest and concerns in agriculture/manufacturing
• 24:51 – Explanation of how tariffs and supply shocks feed inflation
• 25:03 – Worry about unexplained services inflation
• 31:10 – Why FOMC dissents are rare and Powell’s leadership
• 33:27 & 34:16 – Post-interview reflections by Joe and Tracy

Conclusion

This episode provides an unusually candid look at the challenges facing monetary policymakers in 2025. Austan Goolsbee emphasizes his lingering concerns about inflation, especially the potential for persistent services inflation not directly tied to tariffs, and the limitations of traditional labor market indicators due to demographic changes.

Despite market optimism around rate cuts, Goolsbee urges caution and continued vigilance. The Fed’s decision-making is shown to be both data-intensive and shaped by strong internal debate and leadership, offering listeners a nuanced portrait of central banking in turbulent times.

Hosts:
Joe Weisenthal (@TheStalwart)
Tracy Alloway (@TracyAlloway)

Guest:
Austan Goolsbee (@AustanGoolsbee)