Disruptive Policy, AI Investment, and Vibecession Drive Economic Uncertainty

Key Quotes

"I've covered the economy for a long time I've covered the financial crisis I've covered the pandemic I cannot remember a stranger and more chaotic year in the economy than this one a year where it was so unclear what the story was and how it would actually turn out other years the economy is bad it's good but what is the economy right now from the tariffs and liberation day and then the deals and the pauses and the carve outs what is our tariff policy now to the giant ai build out that is keeping the economy afloat but is that a bubble does it herald massive labor market disruption is it good for us is it bad for us good for whom bad for whom to the economic data which has become completely divorced from how people actually feel about the economy if you look at consumer sentiment people feel like the economy is as bad as it was at the depths of previous recessions and yet the economic data the job market wages inflation it kind of looks okay so there is this divorce between how people feel about the economy and what we can see in the economy how do you make sense of all this"

Ezra Klein describes the current economic landscape as exceptionally strange and chaotic, marked by a significant disconnect between macroeconomic data, which appears relatively stable, and public sentiment, which reflects deep pessimism. This divergence makes it difficult to ascertain the true state of the economy.

"I would describe the economy as unexpectedly chaotic perhaps it's just not acting the way a lot of people thought it would in the current situation is it chaotic or is it unexpectedly normal i i kept thinking as I was looking at this data that if you just showed me the macro data of the year if you showed me the jobs numbers like month on month showed me gdp showed me inflation and I didn't know any storyline I would say hey pretty normal year in the economy yeah there's a layer of policy chaos built on top of an economy which seems surprisingly resilient to that chaos"

Tracy Alloway characterizes the economy as unexpectedly chaotic, noting that traditional economic indicators are not behaving as anticipated. She observes that while policy decisions have introduced chaos, the underlying economy has shown surprising resilience to these disruptions.

"The way I conceive of it it's disinflationary because it slows down economic activity yeah because you're taking money out of the economy people don't have that money to spend yeah exactly the way I resolve the tension in my head is not to inflation versus disinflation itself per se but just to think about this idea we have raised the cost of doing business in the United States that I think we can safely say"

Joe Weisenthal explains his view that tariffs are disinflationary because they reduce economic activity by removing money from circulation. He resolves the tension between inflationary and disinflationary arguments by focusing on the core impact: tariffs increase the cost of doing business in the United States.

"I have come out of the last five years with a greater admiration for the creativity and resilience of corporate America to like withstand these shocks and management and executive teams essentially finding a way to very quickly pivot and figure out how are we going to keep running our business under this new uncertainty but not just us right I mean one thing I think about when we were hearing from all kinds of people who had line of sight on global shipping data and port data that one reason the predictions of collapse felt so vivid was that it was so inhumanely complex you would think something that intricate cannot possibly be as flexible withstand the shock of that magnitude this many shocks like shock after shock after shock I mean there've been wars in this period"

Ezra Klein expresses increased admiration for corporate America's creativity and resilience in navigating recent economic shocks. He notes that businesses and their management teams have demonstrated an ability to pivot quickly and adapt to uncertainty, a trait that has been evident throughout multiple crises.

"The way I like to think about it is either the AI if the AI bet fails then we're going to have a recession a bunch of people are going to lose their jobs and if the AI bet succeeds then a bunch of people are going to lose their jobs because AI will be able to replace labor so either way better or succeed it feels like it ends in a bunch of people losing their jobs"

Joe Weisenthal presents a stark outlook on the labor market implications of artificial intelligence, suggesting that regardless of whether AI investments succeed or fail, a significant number of people may lose their jobs. He posits that failure could lead to a recession, while success could result from AI's ability to replace human labor.

"I think the most striking thing to me in covering this for years now like the things I have heard from people building AI are just wild and they were really wild in 2022 and in 2021 like truly like the wildest things I've ever heard in my reporting in terms of like what people believed would be true in like 10 years I'm not even sure they're wrong about what will eventually be true but then watching them end up running these totally normal looking businesses except for the scale of the investment you know how much of your slack should be written by AI kind of thing it is amazing I mean I guess this is true for religion too right you're you're trying to tap into transcendence but also you need to fund the real estate investments for the church but there is this incredible mixture of the sci fi and the mundane and watching the companies have to bring those two things into alignment has been to me sociologically very interesting and a reminder of the incredible power of capitalism to persuade people of things"

Ezra Klein reflects on the extraordinary and often wild claims made by individuals building AI over the past few years. He observes a fascinating sociological phenomenon where these ambitious, almost sci-fi visions are being integrated into the mundane reality of running businesses, driven by capitalism's persuasive power.