Economist unveils where 'green shoots' are unfolding in economy

[00:00:00] well my next guest says that middle america is her favorite emerging markets but in the meantime [00:00:07] folks think about this the jobs report last week was mixed at least against estimates what many [00:00:11] would say disappointing in absolute terms not only that a lot of economic data has been [00:00:17] worrisome at the least in fact this one particular chart caught a lot of eyes it's the continuous [00:00:22] slide in workers share of economic gains my next guest as i've always said is one of the smartest [00:00:27] economists on the street not just because of how she crunches the numbers but she takes a lot of [00:00:31] things into account so let's bring in piper sandler their chief global economist nancy lazar nancy i [00:00:36] want to get to your 2026 the year of middle america in a moment but i do want to start with uh what's [00:00:42] happening at the federal reserve and j pal and and you know and and and the fed's role in this sort of [00:00:49] affordability crisis so you have to go back in history let's go back to 2020 when the fed eased way [00:00:55] too aggressively added as did fiscal policy and pushing price levels up egregiously across the [00:01:00] board fast forward to where we are today you have seen inflation slope some price levels are actually [00:01:06] starting to grind lower particularly on the service side hotels airlines prices have been grinding lower [00:01:12] car companies are starting to cut price and so at the margin things inflation has indeed slowed but i agree [00:01:18] with the level of prices are still high what i've learned over the past i'd say two years in particular [00:01:24] is the importance of being patient not to overreact uh to what happened over the weekend uh with with [00:01:30] with the federal reserve and to wait and see what the end game is at the end of the day we think the [00:01:35] economy is going to turn out to be healthier in 26 and you're going to be surprised that you're not going [00:01:40] to need significantly lower rates because the economy will be doing better than uh as of now is expected [00:01:46] now the economy doing better means uh all the way through not this sort of aggregate data where [00:01:51] you know the top 20 percent of doing 80 percent of buying and everyone else is living day to day week to [00:01:56] week i mean will it be a shared sort of a more shared prosperity that's why i'm excited about what's [00:02:02] already starting to happen you saw small businesses get more optimistic in mid 2025 why because you did [00:02:10] have uh sharply lower interest rates the fed has cut rates already aggressively 175 basis points [00:02:16] two policies put in place by the new administration are very very supportive of smaller medium-sized [00:02:21] businesses deregulation is not talked enough about and there have been a lot of deregulatory moves over [00:02:27] the past uh over the past 12 months and at the same time obviously the tax cuts as your [00:02:31] prior guests have talked about are important not just for that higher-end consumers say with salt [00:02:37] deductions but also that middle-end consumer uh is going to be a big beneficiary of the tax refunds [00:02:42] that are going to start less than four weeks away so i think a less bifurcated economy a healthier [00:02:48] economy is clearly the path for 2026. i think it's a it's a path that we need desperately in this [00:02:53] country not just for markets but for just for the country itself you know your 10 takeaways with [00:02:58] respect to middle america the tech cap cycle uh capex cycle factories building that's on storing [00:03:05] the fed easing but we don't need them as much hopefully we won't need them as much uh you talk [00:03:09] about housing green shoots and i want to bring that up in the sense that president trump trying to [00:03:13] move that needle a lot last week uh with several potential initiatives uh fannie mae freddie mac [00:03:18] trying to lean on home builders just just your thought on the affordability crisis with respect to the american dream [00:03:25] so i think the affordability crisis has actually peaked and you see that even in housing as you said [00:03:30] there are green shoots unfolding in the housing market mortgage applications nehb index existing home [00:03:36] sales pending home sales so you are getting green shoots and so that's happening because at the margin [00:03:41] things are starting to get more affordable and as we go through 26 and you get start to see a healthier [00:03:47] stronger labor market then affordability will become even less of an issue as incomes start to reaccelerate [00:03:53] you uh you you mentioned the tax refunds and watching business confidence closely closely uh you know [00:04:00] there's always a survey and then there's always reality do you think that businesses will take it [00:04:06] it seems to me that they should take advantage of this one big beautiful law that's now in place [00:04:10] because if you ever wanted to reshore or onshore now's the time to do it absolutely full capex [00:04:16] expensing for a factory first time ever we've done that and even prior to that announcement we have seen [00:04:21] more and more on showing in the united states china's been a bad place to do business for over [00:04:25] a decade now uh and indeed companies have have realized that so yeah we are optimistic on on [00:04:30] joint yeah i mean we've seen the uh fdi for china just it's been negative for the last few years [00:04:35] despite the fact that it seems like the financial media uh you know is always kind of cheerleading [00:04:40] them it hasn't been the best place to do business so from from a global perspective uh how does america [00:04:46] stack up with the rest of the world some people remember we started last year with the end of [00:04:50] american exceptionalism being the narrative and we don't you don't hear it as much as you did a year [00:04:54] ago but how do we stack up right now so i still think american is the america is exceptional um and [00:05:01] that's largely because of our innovation our technology innovation we have a capital spending led economy [00:05:06] capital spending improves productivity improves profitability and improves potential gdp growth which [00:05:12] means living standards we're the only country in the world that is really driving thoughts uh towards [00:05:18] that on a secular basis this started 15 years ago you've got green shoots unfolding in some countries [00:05:23] germany in particular where you are starting a capex cycle but we're so far ahead that i think 2026 [00:05:30] you're going to see you're going to be surprised that the unemployment rate doesn't go as high as [00:05:33] people expect and then maybe comes down lower than people expect by the end of by the end of the year [00:05:38] and goods producing jobs blue collar jobs are actually going to be the driver of the labor market [00:05:43] wow when i hear from you i feel so much better nancy yes sir no i really do it's uh your work is [00:05:48] amazing but how many pages was the last report like 89 000 no no no no they they called me up from the [00:05:54] tree society everyone after i printed it out they like don't print any more things like no it was really [00:05:58] phenomenal work thank you nancy thank you for your time happy new year happy new year all righty hey folks [00:06:01] by the way a reminder i'm hosting a one hour program special fox business in depth at the ai arms race [00:06:07] that's wednesday 8 p.m eastern right here in fox business we're going to dive into how america and [00:06:11] investors can come out on top in the artificial intelligence revolution and of course make sure [00:06:16] to sign up to the unbreakable investor town hall right 2026 forget about computers it's the year of [00:06:22] human learning it's your turn to learn it's gonna be thursday january 29th at 2 p.m eastern sign up to [00:06:28] join me in person right here in new york city in the studio hopefully we'll get standing room only like [00:06:33] we always do foxbusiness.com forward slash charles pain live is how you join me i'll see you in a couple weeks