♪♪ ♪♪ ♪♪ Gavin: Welcome to This Week in South Carolina. I'm Gavin Jackson. The Federal Reserve met recently and decided not to raise interest rates. Laura Ullrich an Economist with the

Federal Reserve Bank of Richmond, joins us to discuss the economy. But first national political reporter for the Associated Press. Meg Kinnard joins me to talk about the most recent

presidential campaign news, including Senator Tim Scott suspending his campaign. Meg: Thank you. It's always good to be with you, Gavin: Especially in studio. But Meg, you and I were

both at Senator Tim Scott's presidential campaign launch back in May, completely different scene than where we were this past Sunday, when you were writing his campaign obit. Tell us

rivals. But that really wasn't steady, there wasn't like a splash where all these new donors came to him, and maybe some big ones kicked in some major bucks. So there wasn't

that there also weren't the poll numbers that he would have wanted to see to kind of give a campaign encouragement, hey, you know, you're really doing a good thing. Voters in these

early states, particularly like your message, they'll stick with you through Iowa, New Hampshire and South Carolina. But you know, especially with former President Donald Trump's

dominance in the race and the GOP primary so far, Tim Scott really didn't benefit from any of the other switches and sways that we've seen for some of the other remaining

candidates. So those two things really just kind of came together to a point where his campaign was like, we have enough money to get through those early contests. But we might really be

embarrassed by those results. And so maybe we should get out now and let the field consolidate a little bit. Gavin: Yeah, huge bomb on Sunday night on Trey Gowdys Fox News Show, you know,

Tim, saying that the time people are telling me It's not the time, and we've been hearing that too, on the campaign trail to you know, you got to these Donald Trump rallies. Of

course, those folks are completely different than a lot of other folks who are making up their mind because they are already dyed in the wool ready to vote for Donald Trump. And when you ask

them about Donald Trump versus Nikki Haley, or Tim Scott, they're like, well, we liked Tim, Scott, but not the time and Nikki Haley, they don't register with so that's how

you see that dominance that Trump has. So It's fun. It's fascinating to see that. and then you also didn't really see many debate breakout moments from Tim Scott too. Meg:

Well, you know, It's hard to find somebody along the campaign trail that has something overtly negative to say about Tim Scott, he's made a big point of running a very positive

campaign that resonates. But I think It's also true to who he is as an individual. So yeah, It's hard to find those people who are like, wow, this guy, we really just can't

stand him. But there is a lot of maybe not now maybe in the future sort of thing. He's only 58 years old, in campaign politics, especially presidential stuff that is many more cycles,

potentially to go. But yeah, in the debates, especially when it was a very crowded debate stage with eight candidates. And then, you know, as the number has kind of gone down through

subsequent debates, there haven't been those breakout moments for Senator Scott, like there have been for Governor Haley, for example, for Vivek Ramaswamy, even Ron DeSantis, has had

landed a couple of moments in those. So those didn't really happen for Tim Scott. and perhaps that's part of what kind of translates into, okay, let's close the doors on this

and maybe wait for another cycle. Gavin: Yeah, just super fascinating, especially when we see, you know, not even a month ago, him saying, Okay, we're going all in on Iowa, even though

his package is pulled down a bunch of ads that we're running to Iowa, New Hampshire, which is I guess, maybe the biggest warning sign that we should have been heading. So really caught

his staff off guard, too. And of course, you're talking about the debate stage, we've seen that dwindling, including former Vice President Mike Pence, we thought Tim Scott was

going to kind of take that lane, we were just on the show last week talking about that. So we were really interesting to see how we're shaping up 100 days now, from South

Carolina's primary. Meg: Getting closer and closer. And you know, going back to Sunday night, and the campaign staffers that I was talking to that we were kind of like, wow, what

happened? Did you know about this? The number of them who said no, I did not know that this was coming. Sure, when you have a big announcement like this, it makes sense to have kind of a

close hold on the information, or else it is going to leak out before the candidate really intends for it to, I understand that. But to hear, they just asked us all to pick up and move to

Iowa for these big moves. And now we have to turn around and go directly back home. There's a lot of frustration campaigns always come to an end, most of them come to an end in a

negative way for the candidate and the staffers. But still, this kind of was a different sort of moment coming, you know, at a point where I think folks had at least assumed they would be in

it through Iowa, if not able to stick through the other contests that follow. Gavin: But I guess that's kind of what everyone's been talking about is having to consolidate this

field for folks that want someone besides Trump and not to have repeated what we saw in 2016. You're gonna start seeing folks drop off here, but we still have a debate stage coming up

on December 6 in Tuscaloosa, Alabama, where we do have a guest Governor Christie's took me on the stage too. Meg: He has said that the I think there's a little bit of dispute as to

whether some of the polls he's citing in terms of yes I have what I need may qualify. The RNC won't tell us until 48 hours before that, that debate actually happens. Who's in

and who's out, but don't forget at this point, going back to the the size of the field in 2016 and the 2016 And cycle, we had 13 Republican candidates still competing. And I have

to think that in the minds of strategists, even some of the candidates themselves, there's a memory back to that point of like, remember that, remember when we didn't consolidate

and pull down and kind of get behind each other. And look who we ended up with who's now still the titular head of our party. and, you know, we're facing off directly with. So I

think there is a memory back to that cycle and kind of looking forward into the votes of next year, among some of these Republicans thinking, Alright, let's do it differently this time.

Gavin: And saving some of that money to for for Scott, because Senator Scott just got reelected. Again, this is last term in the Senate. You can hang on to some money, he brought a lot of

money into the race, and I guess he can use it for whatever the future holds. Do we know what his future is looking like right now? Meg: If there's another federal race for him, he

could potentially hang on to some of that. Let's, you know, like you noted, he has said this is going to be his last Senate race. He's never said anything else about other

contests. He's already served in the US House. Who knows we saw Mark Sanford go back to the house after serving as governor and running for president everything else. So you know, maybe

there's another federal race where he could just hang on to it and do something different with it. So you know, that remains to be seen. It's coming back to South Carolina, he

couldn't use the money for this, but there is a governor's race that's going to be coming up in 2026. So that'll be before the next presidential cycle. And you know,

Senator Scott may be looking to have something that will ground him future, you know, in the future more in South Carolina. So we'll see. Gavin: It's gonna be a wide open race

there in 2026. And he'll still be in the Senate. So right when hurts, especially when it comes to fundraising. but you know, we're watching and waiting out with the supporters.

Right. So this just happened on Sunday. Big seismic shift, we're looking at donors. Specifically, we look at Nikki Haley, right, because it seemed like they were really sharing a lane

for the longest time splitting a lot of supporters donors now that's changed. So Meg, what are you looking at when it comes to where that money is gonna go? We're looking at Wall

Street. You know, we have these reports with Nikki Haley me with JP Morgan Chase's Jamie Dimon. She's talking to megadonor Ken Griffin, who's leaning toward her, just for that

Spencer's Wick, who Spencer's Wick who was on Romney's campaign in 2012. A big fundraiser for him is also supporting her now. So kind of coming back to her versus you know,

if this was kind of like the big story for Scott going into this race, a lot of people left her for him. Now It's coming back full circle. So what are we watching when it comes to

donors and supporters for Haley and DeSantis? Meg: Ideologically there are a lot of similarities between Tim Scott and Nikki Haley. Sure, It's convenient and kind of a cute sound bite

that they are both South Carolinians, but they do have a lot of agreement on issues. And so if you're a donor, and you're looking kind of where your money is going to be parked, in

terms of candidates, she might be your next best bet if Tim Scott had been your guy, but you know, we're seeing also some other donor moves of people looking toward Ron DeSantis, and

thinking, well, he might have, you know, more momentum, or he might be occupying a bigger of the non Trump Lane within the GOP primary. So you know, maybe he has a better chance. I mean,

It's always hard to know. but you know, if you had been thinking about Mike Pence, if you had been thinking about Tim Scott, and you're kind of looking around, there are a lot of

differences with Nikki Haley. But there are a lot of similarities. and so some donors might be thinking, well, she has momentum, she does have a lot of upward mobility in terms of where her

campaign has gone through these last couple of debates, she's had some good moments, and has been able to capitalize on that in terms of really, you know, getting a appearance of

support, and we'll see how it actually translates. But this would be the time for her campaign, to try to get a hold of some money to build out more infrastructure. We've heard

that there still isn't a lot of infrastructure in these early states. She's spending a lot of time there. But what does the ground game look like? That's a tired phrase, but

it actually is starting to matter now that we are very, very close to Iowa. Gavin: And it seems like you could probably start taking over some of these operations to like whatever Tim

Scott's operation was like in Iowa, and you can also pick up some Pence, folks. I mean, this is when the the field starts shifting a good bit, especially when we're like some 60

days away from Iowa. I mean, that's right around the corner. <It is happening.> Yeah. and then you look at also, you know, I saw that Trump's own pollster was saying that he

expects a lot of folks that were supporting Scott to go to Haley, kind of what you're talking about there to Meg. So It's going to come down to money and really just kind of a bare

knuckle brawl, I would say between Haley and DeSantis. At this point, as they're fighting for a very distant second. We need to... Meg: Absolutely, I mean, former President Trump is

still very dominant in a lot of these early state match ups. And the polling figures that we see. I mean, that is across the board true. And so wherever either of the other two were Haley

and DeSantis end up it is a distant second to him at this point. You know, that's in large part due to just kind of a maintenance of popularity, and also just the former president kind

of seeming like he was running even when he wasn't, you know, he's always just kind of like, kept reminding people remember what I did for you didn't really love me maybe to

begin with, but you grew to love me, and I'm still saying the same stuff. Gavin: So you think they're really I mean, we also know that she's introducing yourself more and

more, she's putting up $10 million in advertising on these airwaves. We've seen this other candidates do that before and now she's really kind of capitalizing on this

momentum, which we keep hearing a lot about, especially when it comes to polling. We saw the Winthrop poll come out this week where she's still maintaining second place. Well ahead of

DeSantis, but still very far behind Trump. So It's gonna be interesting, I guess, Meg, what do you watching him with, with two minutes left here over the next couple of months, weeks,

when it comes to this field, where we can see things going? Meg: I think that we're gonna need to see like visible excitement. You know, you and I have both been out on the road.

We've been in Iowa and these early, early places, early caucus places and voting places. And It's not all about crowd size. That is not like, I'm not saying that at all. but I

think you can <Don't tell people on Twitter about that though.> But seriously, like, that's so true. but when you look at these events, you know, kind of like feeling the

energetic vibe. It's hard to put into words, but you can feel it. <Yeah.> And I think that as we go into those places, even here in South Carolina, which obviously is the first in

the south GOP primary state, we're going to need to kind of feel that vibe to see like, are any of these people who potentially had been supporting Donald Trump, maybe changing their

minds? Some of them? The answer's no, I don't know what the percentage would be. But a lot of these people are baked in. And that's where they are. But for the people who

might possibly be willing to change, they are going to need to feel excitement for whichever that other candidate is, who would be getting their support. And that's what we're

going to have to be able to see it especially in the early states where these candidates are going to be hitting the ground hard between now in Iowa. Gavin: Especially that and then also the

December 6 debate and then don't make any missteps to we've already seen a couple of those happen already. Meg: You got to make sure to land your zingers and to get your attacks

in but also not to mess up and those that's a very delicate balance. I'm glad It's not me up there on the debate stage. But yes, absolutely. That's on their minds too.

Gavin: A lot to watch and we'll be there. We'll be on the campaign trail with AP. National politics reporter Meg Kinnard thanks so much. <Thank you.> Joining me now to

discuss the economy is Laura Ullrich. She's a regional Economist with the Federal Reserve Bank of Richmond. Laura, welcome back. Laura: Thanks so much for having me back. Gavin: So

Laura, let's just start with a really nice, big broad question, and how is the economy doing right now, from your perspective? Laura: Yeah, you know, Gavin, this is a, this has been

such a unique time. Now I've gotten I've been saying that for three years. But overall, the economy is doing well. I mean, we continue to get kind of month after month of positive

news on the employment front, the retail sales report that came out a few weeks ago was was more positive than people expected. So overall, the economy is is strong. However, clearly, we

still do have inflation well above the 2% average to target that by the Fed. and so even though the interest rates weren't increased this this past week, most recent FOMC meeting, Chair

Powell will certainly, you know, put a statement out saying that, that they were a little concerned that additional action by the Fed might be baby might be needed to get inflation back to

2%. So mixed signals, for sure. But overall, the economy is holding up well. Gavin: Yeah, when we look at unemployment in South Carolina, you're you're mentioning, we're at a

record low of 2.9%. In September, labor force participation rates at 57%. hourly earnings are up to $30.07 an hour. So these are usually really great things to see. Does that work with how

the economy is going right now when it comes to inflation also being a problem? Laura: Yes, so great question. When I saw the most recent jobs report, it was more positive than expected, way

more positive than economists were expecting. My first thought was, wow, from an employment perspective, that's really great, right? and my second thought was, goodness, that makes

getting inflation down even harder, right? So inflation really can be caused by increases in demand or decreases in supply. And on the demand side, the more money people have in their

pockets, obviously, the more they demand goods and services. And so as you see those wages going up, as we see more people becoming employed, demand for goods and services climbs, which is

kind of the opposite of what that we need for inflation to come down. We don't necessarily need to be we don't need to see job losses overall. Right. I mean, it is possible for us

to have this, this idea of a soft landing that everybody's heard about. But certainly the very strong job growth kind of works against what the Feds trying to do with inflation. Gavin:

And Laura, you mentioned that soft landing where you're trying to get back down 2% without crashing the economy. Are we feeling pretty optimistic about that? I mean, we we've been

talking about different things for the past three years, everyone's always been calling for the recession, that doesn't happen. Now we see these incredible economic numbers, too.

So are we still looking for some sort of recession or a pullback? Or how do you see the next couple months? Laura: So I will tell say that, if you look at if you looked at all the economic

forecasts that were out there for 2023, many of them were calling for a recession this year, or early into next year. But over time, most of those models have to have taken out the

probability of a recession. Like that's not what they're saying now. So I think the refreshing recession fears certainly continue to abound, but are lessened compared to what they

were this time last year because growth has just beaten expectations. I mean, those forecasts were basically expecting flat growth and 2023. and we've seen growth that's been

pretty strong for for the US for this year. All that being said, though, the if inflation continues to come down, it might not happen at a very fast pace. But if it continues to come down,

slowly, we could have this this idea of a soft landing, right. But if inflation is more stubborn and doesn't come down back to where the Fed wants to be, needs it to be, then additional

Fed policy might have to take place, and then I think the probability of recession could go up. But right now I feel, you know, It's certainly possible for us to have have have a soft

landing. Gavin: Though, if you listen to what the opinion polls are saying, or what Americans are feeling by the economy, you would think we're in a recession right now. Right? They say

everything's on the wrong track. It's always interesting to see this, you look at the fundamentals are so strong, we're talk about GDP growth, you're talking about the

retail sales, unemployment, these these higher wages. So why do you what do you say? What do you tell people, when you see this disconnect between fundamentalism and what folks are feeling

and seeing? Laura: You know, It's so interesting there, this is a typical pattern, we also see this with companies, we help run the CFO survey, which is a national survey of CFOs,

across the country, along with Duke University and the Atlanta Fed. And in the CFO survey, if you asked CB... CFOs about the overall economy, they're relatively negative about it. But

if you ask CFOs, about their own companies, they're positive. But that gap between how people and consumers we see the same thing if we ask them, how was the economy overall, those

those views right now are on the negative side. And if you look at the Consumer Confidence Index, and some of those measures, they're they're low, they're pretty low points

right now, things that are almost comparable to kind of the great recession. But then if you ask people about their households, they're more positive. So those patterns are known. And

they're always kind of always that way. But right now, that gap between how people feel about the broader economy and then their own company or their own checkbook, is wider than it

typically is. And so so you can feel this right, and kind of the tone of conversation about the economy and things like that with with people, whether It's at work or on TV, or or

friends. But you can also see that people are feeling pretty confident about their own finances, or their company finances, because they're spending money, right. That's why

we're seeing retail sales climb. That's why we're seeing, you know, spending in travel and tourism remain as strong as it has been. So the disconnect is there. But I really

think It's the how people feel about their own company or their own wallet that really drops consumption. Gavin: Yeah, one of those fun little phenomena that economic economists get to

play around with. And maybe part of that has to do with mortgages and interest rates, or we're seeing that the Fed did hold those the interest rates at steady at 5.5%. Around there. To

combat inflation. What were some of the big takeaways from the meeting this month with FOMC, that you heard from chair Powell from other folks, and maybe what you're hearing from

businesses in the Carolinas about some of the challenges that they're facing. Laura: So for businesses, the range of impacts they're they're experiencing from the interest

rates increasing is just depends on how interest rate sensitive they are, right? So if you talk to companies that are in interest rate sensitive markets, like banks are commercial real

estate, this is really challenging time for them. There's other companies, though, that are still experiencing very high demand, because consumption demand has remained so high. So we

hear a range of opinions there. But, you know, I think overall, the tone from the FOMC, when I read the statement, and I've listened to some of the sound bites from from interviews from

this week, is that, you know, this month, they decided that it was time to hold a kind of pause, just continue that pause, but that they're not confident at this point that It's

done. And if you look at the summary projections that the FOMC members put out, you can see that overall, they're kind of expecting maybe one more increase, even by the end of the year.

So it'll be interesting to see what happens in the next few months. But still a lot of uncertainty out there on the exact path of a return to 2% inflation. Gavin: Yeah, and that could

be a matter of whether you say the interest rates tick up more, or if they're held steady for longer, that's just gonna be something that you watch for the next coming months. But

while they are staying steady, we are seeing mortgage rates where I'd maybe a lot of folks are really feeling that pinch north of 8% right now for a 30 year fixed. And that's a

hard pill for people to swallow when we had rates as low as 2.5%, you know, as a result of the pandemic, so do you think It's maybe a matter of people trying to mesh expectations with

reality? I mean, you look at the historic average for mortgage rates, like around seven 7.5%. So we were maybe spoiled at 2.53%. Now we're at eight, we just kind of have to live with

reality a little bit. Laura: Yeah, I've mentioned this when I'm out and about presenting right now. Yeah, when I bought my first house was in 2001, and I had an 8.2 or 2002. I had

an 8.25 percent mortgage. And my parents thought that was amazing because when they bought their first house, they had a 14.5% interest rate, right. But what has happened since then is no

one under the age of 40 years old has ever seen this in practice, right? Interest rates have been very low for very long. I mean, how long were we saying we have historic low mortgage rates,

we were saying that for really a decade. So there are a lot of people who are locked into these very low mortgage rates. And so for many of us that have those low rates, unless we have to

move right now, we're probably not going to choose to jump up to an 8% rate, right. And so you'll see some stagnation there from existing home sales. and then for people who are

just entering the market, these higher rates mean, they might have to buy smaller homes than they were expecting, right? Or maybe not as not as bright and shiny as they were expecting to

buy. And so I absolutely think there's adjustment phase there for people to take what they you know, to match their expectations with with what's actually going to happen. Gavin:

And then Laura, when we look at global geopolitics to and in conflicts going on around the world, and how that might affect, you know, the the economic recovery abroad, you know, we've

had such a strong recovery. Not every country has had such a beneficial economy. But then you look at, you know, the war in Ukraine now with this Israel and Hamas situation going on? How do

you see that playing out how that might affect the United States? Do you see any risk for us or any benefit? Unfortunately, as morbid as that might sound? Laura: Yeah, I think geopolitical

risk is one of the largest risks to the to the economy and us having a downturn. You know, a lot of this has to do with the risk levels have to do with how much we import or export to

different places. And with Israel and Palestine, I mean, there's not as much direct risk, and that we don't import a lot from those countries. But if that geopolitical conflict

were to break out into a broader region in the Middle East, we could see really significant impacts. And especially I mean, you know, in the 1970s, that some of the inflation and economic

pullback we saw then was due to issues in the Middle East and oil embargoes and things like that. So certainly something we need to pay really close attention to. And we're not isolated

from the rest of the world, we can we consume products from the rest of the world, they consume our products. And so it certainly can have serious economic impacts. Gavin: And that's

going to be something we have to, like you said, keep an eye on but you'll be watching, I guess what the price of a barrel of oil and similar indicators? Laura: Yes, absolutely. And I

think, you know, part of this is about the geography of where it is and how it spreads, if it stays isolated. Those impacts might be more isolated. But if it were to spread outside of that,

I mean, I think there's there's certainly concerned that this could become a broader Middle Eastern conflict. And we do have a lot of import export relationships with that part of

the world. I mean, we've seen that with Ukraine, too, you know, when when that broke out that there were certain things like wheat, for example, that price went up and other products

like nitrogen based fertilizers were a huge percentage of those are made in that part of the world. And so some people might not have noticed impacts at all. But if you're a farmer in

the state of South Carolina, you saw impacts on the fertilizer prices, prices that you were paying all the sudden, too, right? So a lot of it depends on the industry that you're in and

and like I said, what those consumption patterns are around the world. Gavin: Are with just a couple minutes left on ask you. You know, we've we've seen some things that would have

been shocks to our economy to we saw, like strikes, you know, the writers strike, the auto worker strikes, those have all been resolved for the most part. And we're still very strong.

So I'm wondering, you know, what are you watching going forward? What is on your radar when it comes to indicators to watch here at home, when it comes to just how healthy the economy

is going forward? Laura: Yeah, absolutely. So consumption is really what has been keeping the economy. So strong consumption makes up about 70% of GDP and real consumption. So consumption,

holding inflation flat, has remained extraordinarily resilient, given the inflation that we've had. That's the number one thing I'm watching because if that starts to slip,

then you're going to see companies producing less, which means they need less employees, more layoffs, those sorts of things. But I do think we're in a unique labor situation now

where because of the demographic shift that we're experiencing, and the baby boomers retiring at a at a faster pace at this point, employees, the labor market, labor supply is lessened.

And so employees have more power than they did a few years ago. And you're seeing that in some of the strikes and some of the disagreements between unions and companies. And so I

don't expect those to go away anytime soon, because this demographic challenge is just going to continue to get to get worse over the next few years. Gavin: And we'll be watching

consumption for the fourth quarter, especially with the holidays coming up. So that's always a big one to watch. So, Thanks, Laura. Thanks for catching up with us. It's Laura

Ullrich she's a regional economist at the Richmond... Federal Reserve Bank of Richmond. Thanks. Laura: Thanks so much for having me. Gavin: To stay up to date with the latest news

throughout the week. Check out the South Carolina Lede to pod cast that goes on Tuesdays and Saturdays that you can find on "southcarolinapublicradio.org" Or wherever you find

podcasts. For South Carolina ETV, I'm Gavin Jackson. Be well South Carolina. ♪(Captioned By: SCETV)♪ ♪♪ ♪♪