# Fed Independence, Global Debt, and AI Layoffs

**Podcast:** Marketplace
**Published:** 2026-02-03

## Transcript

The checkout with the Weltwide Best Conversion.
The legendary checkout from Shopify, this into social media, and Uber all that switch.
Yeah, that again from American public media.
This is Marketplace.
And also probably we're not gonna get the biggie, the January unemployment report that was due on Friday.
All of that said, though, and on the theory that we're going to get the data eventually, Carla made some calls to see what people are going to be looking for, whatever.
Not only will these data show what's been going on in the job market recently, they'll also update the understanding of the past year through a process called benchmark revisions, says Daniel Joue at the job site Glassdoor.
So we might get a very different picture of 2025 in hindsight, where the job market was actually much slower than we originally thought, and thus much closer to stall speed.
Whenever these jobs numbers are released, he'll be looking closely at healthcare.
And so any slowdown we see in the healthcare industry is concerning.
If the jobs report is delayed by a day or two, that wouldn't be a big deal, says Jesse Rothstein at the University of California Berkeley.
But if the shutdown drags on again and the data gets tangled up in it again, he says it means that we're flying blind, that we don't really have up-to-date information on how the labor market is doing at a time when we're already flying kind of half-blind because of the effects of the October shutdown, and at a time when the labor market seems to be teetering on an edge, and it's not clear if or when it's falling off that ledge.
And if these data delays and disruptions become the new normal, he says that can make the picture of the labor market even fuzzier and harder to react to.
I'm Carla Javier from Marketplace.
But there have been 16 chairs before Warsh over the course of this institution's 112 years.
You're gonna have to live with the fact that forecasts have a range of uncertainty.
Irrational exuberance.
In my opening remarks, I'd like to briefly first review today's policy decision.
But first, I'll review recent economic developments in the outlook.
And we are well positioned to wait to see how the economy evolves.
Extra points if you can identify all those voices.
But our point is that chairing the Federal Reserve is arguably the most powerful job in this economy, which means the process for how we get new ones matters.
So we've called three historians to talk about that process and how it normally works.
And after the confirmation, then bada bing, bada boom, we have a Fed chair.
Bada bing bada boom.
Peter Cotti Brown is an associate professor of financial regulation at the Wharton School at the University of Pennsylvania.
More interesting answer is a little bit like a selection out of hope.
Uh we've got the president and his advisors gathering mostly in quiet.
Uh and you know, the rest of us on the outside, we parse some tea leaves and look for the white smoke until the nominee is announced.
And just review here.
Presidents have chosen to reappoint the Fed chairs they inherited from their predecessors, even if they were from the other political party.
President Clinton reappointed Greenspan, who was originally nominated by Reagan.
President Obama reappointed Bernanke, who was originally nominated by George W.
Bush, and President Biden reappointed Powell, who, lest you had forgotten, was nominated by President Trump.
That is decades of Fed appointments during which the politics of this economy became more and more front and center.
There's been really this increasing movement of the Fed into the public eye, both because of the economic turmoil we've gone through and because of the way that politics in general has become more and more of sort of a spectacle and uh even a zone of entertainment for many.
That's Jennifer Burns.
She's a professor of history at Stanford, the third member of our panel today.
Entertainment might be too strong a word for it, but the selection of a Fed chair, always important, has under President Trump become something of an economic spectacle.
Part of the reason for that dominance is that the incumbent and the institution are also independent.
And we've seen what happens when that breaks down.
So one of the most significant examples of a new Fed chair being chosen by the president and marking sort of a dramatic shift in Fed policy, is President Nixon's choice of Arthur Burns.
Arthur Burns was someone who had known uh President Richard Nixon through various phases of his career.
And putting him at the Fed was Nixon's effort to draw the Fed much, much closer to presidential prerogatives.
Burns became chair in 1970.
By 1974, inflation was above 11%.
But under Burns, the Fed was unwilling to adopt the painful measures that were probably necessary to bring inflation under control.
Which had the unfortunate effect of really helping inflation become more entrenched in the economy and more sustained.
So entrenched, in fact, that after President Carter put Paul Volcker in the job in 1979, Volcker pushed interest rates to 20% to get inflation down.
That's a decision I asked Carter about decades later.
Well, well, you know, I was the one that suffered politically, and Ronald Reagan was the one that benefited from the Paul Volker economic philosophy.
One president's thoughts on the importance of Federal Reserve independence, though, are another president's vague guidelines, I guess you could say.
Uh made made quite a show of antagonizing the Fed during the 1988 presidential election and really viewing Alan Greenspan as keeping interest rates too high.
In 1991, with the federal funds rate around 7%, President Bush actually called it out in his State of the Union.
Interest rates should be lower now.
It's a dog that didn't bark, though, because who did he nominate when he had his one choice as Fed Chair?
He re-nominated Alan Greenspan, the person that he seemed to be, you know, most uh skeptical of.
That was then, this is now.
Today, the Federal Reserve is more important in economic policymaking than it ever was.
We've had the Great Recession and COVID, which solidified the Fed's role as the lender of last resort.
And now we've got a president who believes and is not afraid to say that he should have a role in setting interest rates.
I think it's different in that the pressure campaign is very public.
I'd love to get the guy currently in there out right now.
Not only has President Trump threatened to fire the sitting Fed chair and berated him for not lowering interest rates more.
The head of the Federal Reserve is a stiff.
The Department of Justice has launched a criminal investigation into Jay Powell and the central bank that smacks of politics.
So we've never seen anything like what Donald Trump has done in the previous year to the Federal Reserve, which is an out and out assault on its independence.
And therefore we've never seen anything like a nomination coming out of the context of this assault.
The Federal Reserve System has hundreds of economists on staff, seven members of the Board of Governors, 12 regional bank presidents, and all of those people are mandated by Congress in the Federal Reserve is just looking to the Oval Office for the direction on interest rates, well, that's an experiment that has been run many times before, just not in the United States.
And the result is hyperinflation.
Turkey, Argentina, Zimbabwe, all of them places where inflation got way out of control because politics got in the way of monetary policy.
And that's why the stakes are so high.
As they say, with great power comes great responsibility, but also comes great political risks.
You know, you you can't see the grimace on my face right now.
I'm very worried about how this is going to go.
Lot of fiscal policy uncertainty.
That is the job the next Fed chair inherits.
Thanks once again to Jennifer Burns at Stanford, Peter Conti Brown at Wharton, and Eric Hilt at Wellesley.
Speaking of the labor market, as Carla Javier was just a minute ago, layoffs are making headlines again.
Amazon, UPS, Pinterest, also Dow, the chemical company, they've all announced job cuts in the past week, several of them saying artificial intelligence was one of the proximate causes.
But honestly, what does it even mean when companies say they're letting people go because of AI?
Marketplace's Samantha Fields asked around.
Every time Molly Kinder at the Brookings Institution hears a company attribute layoffs to AI, she's skeptical.
Our best labor market data show that we're really actually not seeing much of an impact yet on the labor force.
There's no real proof that the much talked about, much feared AI apocalypse is here.
It's certainly true that some companies have to invest a lot of capital in the infrastructure behind AI, which has in some cases forced them to cut costs in other areas.
That's not the same thing as AI being good enough to take people's jobs, though.
But Sarah Myers West at the AI Now Institute says pinning layoffs on AI sounds good to investors.
I think it's a way for companies to look like they're being really innovative while sort of stepping back over investment, or they need to trim their books, or there might be a variety of other reasons why they need to make layoffs.
None of those reasons seem quite as positive as AI.
Lawrence Schmidt at MIT's Sloan School of Management says there are some jobs AI can do.
But in many instances, it will change what we are doing rather than eliminate the job entirely.
In the short term, Molly Kinder at Brookings says we are probably overestimating how many jobs are vulnerable to AI, but we're probably underestimating how transformative will be in the medium to long term.
When I look out five to ten years, I think we're going to be seeing a lot more impact on jobs.
And she says we need to be doing more to prepare.
But does that magic potion have its limits?
Hmm.
First, though, let's do the numbers.
Down Industrials up 515 points on this Monday.
That's 1%, 49,407.
The Nasdaq rose 130 points, about six tenths percent.
Finished at 23,592.
SP 500 climbed 37 points, about a half percent, 69 and 76.
There, Disney made a record 10 billion dollars in revenue last quarter, and that's just in its experiences division.
Think theme parks and cruises.
Ticket sales were indeed up at U.S.
parks, but those parks saw fewer international visitors.
Wonder why that is.
A new chief executive is expected to be announced soon for the entertainment company if Bob Iger decides.
So the Walt Disney Company plummeted 7.4% on the day.
Gold and silver prices continued their slide, although not quite as dramatically as Friday.
Gold down about 4%, silver dropped about 6%.
Bonds down yield on the 10-year T note 4.29%.
You're listening to Marketplace.
This is Marketplace.
I'm Kai Rizdahl.
The thing about the economy, I'm talking personal, national, and in this specific case, global economies, is that they run on debt, credit, leverage, borrowing money to get things done.
The tricky thing about that debt, though, is that it can kind of get away from itself.
The more you have and the less you pay down, the more overwhelming it gets.
Obvious perhaps, but critical.
Because according to the International Monetary Fund, global public debt, that is debt held by governments, is projected to exceed 100% of global GDP.
That is to say, the entire global economy, by the end of the decade, the highest that level has been since 1948.
So we've gotten Terra Sinclair on the phone to talk things over.
She's a professor of economics at George Washington University.
Professor Sinclair, welcome back to the program.
That's great to be back.
Let's deal with the facts on the ground as we have them.
Global public debt, sovereign debt, uh is high, it is rising.
Is that a bad thing?
And if so, why?
Well, so as I'm an economist, I have two hands, and so there's at least two perspectives on this.
But let's let's break it down and kind of zoom in on uh kind of both the pessimist side as well as the optimist.
Um from the pessimist side, debt can't rise forever.
And so when we see these public debts rising, that's that's a concern if we don't see a clear pattern of future stabilization.
But it's also the case that when people are looking at uh the where public debt is today, really the the question is what is that money being spent on, and is it crowding out private sector spending that could otherwise be a better outcome for global society?
Let me take the second half of that answer then, uh, and the crowding out thing.
Um, is it crowding out and and what's the effect of you know, some guy in Sheboygan trying to, you know, make interest payments on his car or his house or whatever, uh, and this rising global public debt?
Yeah, well, I I I think the the guy in Sheboygan might be really concerned about this because it may explain some of the rise in interest rates that people have seen and the affordability of uh various large ticket items where they might be uh borrowing from banks.
Um and you know, one way to think about this is just you know, we've got these two big players, the US and China, and they're both looking to borrow heavily, and they're competing for that same pool of global savings, and that's gonna affect interest rates around the world, even in Sheboygan.
Even in Sheboygan, lovely town uh as it is.
Um is it, do you suppose too late?
And I guess we have to frame this two ways.
One is for the United States, which is you know obviously the world's biggest economy, but also you know, we're paying a trillion dollars a year in interest on our debt.
Um so is it too late for the United States to turn things around and then globally, you know, are we at the tipping point of of the debt trap here?
Well, so I think this is where things get uh a little more interesting because uh on the on the one hand, we we are facing massive demographic shifts, and that does point to some concerning patterns and a potential tipping point because we're we're looking at a world where we're going to be trying to support a larger global population at a smaller workforce, and that that's gonna be difficult to do.
But on the other hand, you know, we may also be at a point where um you know AI and other sources of productivity uh may help us and may be able to offset that.
No pressure here, but you're doing a whole lot of on the one hand, on the other hand here, Professor Sinclair.
Uh yes, the the the classic economist problem.
Um but I think I mean but I think it's important to really keep in mind that we're we're looking at you know a world where we tend to have these really big doomsayers, like you know, at any moment we're gonna have this giant fiscal crisis.
Yeah, whereas on the other side, then there are people who are like, oh, okay, it's it's actually fine, you know, if we if we look at it from the perspective, for example, of global wealth rather than as you know, so debt to wealth as compared to debt to GDP, things maybe don't look so bad.
Let me just pick up on that word you use crisis.
You know, one of the things that that has boosted certainly US debt and and global debt to some degree in the last decade and a half or so, almost 20 years now since the financial crisis, has been huge government expenditure in times of dire economic crisis.
And one does imagine that there's a limit to how much a government can do as its debt load piles up, no matter how bad the situation gets.
Right, for sure.
I mean, I think that's really where we're you know, one of the key concerns that we have is that even if it's not a financial crisis that kicks off our our next concern, it may be that we have some other economic shock that hits the economy, and then it's followed by another financial crisis because there's limited room for additional borrowing on the part of governments, may make a follow-on crisis for any other impact on the economy.
Terrace Sinclair, she's a professor of economics, uh, also the chair of the department at uh George Washington University.
Professor Sinclair, thanks for your time, appreciate it.
Thank you.
Productivity, in fact, has been growing faster than it has historically, which has plenty of upside.
Higher productivity can generate higher profits, it can help businesses keep prices down, and it can let them raise wages.
But even though productivity growth has been strong, wage growth has been slowing.
What's up with that, you ask?
Here's marketplace's Justin Ho.
If you're a business owner and your workforce becomes, say, twice as productive, that means it can finish a day's work in half the amount of time.
You could send them home, or you could have them make or do more stuff so the business can make more money.
That's exactly where economists would say that productivity is the elixir for our overall output growth.
That's Nicole Servey, an economist with Wells Fargo.
She says more productive businesses can use that extra money to grow, to buy new equipment, maybe open a new location.
And if you have stronger profitability because you're producing more per hour worked, you could turn around and reward your workers by giving them higher wages.
But higher productivity doesn't always mean higher wages.
Ben Zipperer, senior economist at the Economic Policy Institute, says ever since the 1980s, wage growth has been held back by deunionization and too much unemployment.
When there's more people trying to find a job, that means that employers don't have to work as hard to find workers, and that puts downward pressure on hourly pay.
And Zipper says that's why wage growth hasn't kept up with productivity growth.
Workers are almost producing twice as much as they used to produce in real terms since uh 1980 or 1979, whereas hourly pay basically grew by only a third of that.
That gap started to narrow again after the pandemic.
Demand for workers picked up, and that encouraged them to find better jobs, which in turn increased both productivity and wages.
Those productivity enhancements allowed companies to pay uh much higher wages, but they also got something for paying higher wages.
That means uh a stable and better suited workforce that is more productive.
More recently, as productivity has grown, companies haven't been as eager to raise pay.
Nicole Serve at Wells Fargo says companies have been spending more on equipment and tariffs.
And so I think what we're seeing is that the worker is not being prioritized right now in terms of those productivity gains.
Companies are nervous about spending money on anything right now, says Courtney Schupert, an economist with macro policy perspectives.
If you're uncertain about your business environment or what demand is going to look like, maybe you hold off on passing along some of those profit increases in part just to protect margins.
But Shepherd says the big factor holding back wage growth is the weakening labor market.
Companies are holding off on hiring.
Some are laying off thousands of workers.
People aren't quitting their jobs as often.
So workers have less leverage.
Workers, you know, were able to demand a higher wage a few years ago when there was such a turn in the labor market, and now that balance has shifted.
It's certainly possible to have a productive and growing economy, even if the benefits are not widely shared, says Ben Zipperer at the Economic Policy Institute.
That has been the experience of the United States, you know, over the last, you know, four or so decades.
But zipper says the post-pandemic economy taught us that it's also possible for companies to share those benefits with their workers.
I'm Justin Ho for Marketplace.
Saw this in the Wall Street Journal that avocado prices were down 19% in December over a year ago.
You know where this is going, right?
Data comes from the market research company Circana.
Here is the mind-blowing data point.
We are set to have imported around 290 million pounds of avocados from Mexico in the four weeks leading up to the game on Sunday.
You want guac?
You gotta have avocados.
290 million pounds.
Amir Babawi, Caitlin Esh, John Gordon, Noya Car, and Stephanie Seek are the marketplace editing staff.
Kelly Silvera is the news director.
I have no idea how any of them feel about guacamola.
I'm Kai Rizdell.
We will see you tomorrow, everybody.
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