 Can you all see that? Okay, great. So I'm basically gonna break this into two parts. First of all, I hope you're all members of Navy Federal, if not contact me, I'll personally open an account. I'm sure you all are, but just an update on your credit union, biggest credit union in the country, in the world, we're about 160 billion in assets now, and we probably serve over 11 million active duty veterans and their families. So I'm gonna break this into two parts, where we are now, which is what I generally talk about when I do these presentations, and I do them a lot, especially for people inside the credit union. Then I'm gonna talk about something I really never get a chance to talk about, but I know you all are keenly interested in. And it's the strategic lessons that we've learned and we are learning about a pandemic recession. As you can see from the chart here, we're not back to our pre-pandemic trend as far as gross domestic product goes, which is really the ultimate measure of how well the economy is doing. We're getting there. What's missing is the last leg, which is the fourth quarter. What you're saying? Which is gonna be up quite a bit. So these old men, I gave instructions, I didn't. Not sure where that came from. So let's jump right in. Omicron, the virus's boss. I'm sick of using that phrase for a time over the summer when we thought we'd really gotten rid of COVID. I stopped saying it, but really the virus is boss now. And as you'll see throughout the presentation, COVID affects virtually everything about the economy. So let's look at where we are with the latest wave Omicron. News is not good, as we all know. This is our way up. We are doubling and doubling again every four days. One of the things that obviously we're most concerned with is patients in intensive care. That looks bad. It's not actually as bad as it looks because so many people have COVID. People are in intensive care for reasons other than COVID and they're tested. And it turns out maybe 40% of people in a hospital are gonna have COVID anyway. So it's still bad, but it's not as bad as it looks. So where are we going from here? South Africa is a good indicator. We're about six weeks behind them. And they reached a point in which cases fell precipitously. And this is what generally we're finding happens, especially with Omicron. It rages like wildfire through a population. Fortunately, it's not as virulent as Delta or previous strains, but it's highly, as we all know, transmissible like the common cold. Good news, this is really my area watching in D.C. We were one of the earliest to have severe Omicron cases and we peaked and now the cases are falling precipitously. Knock wood in the next two or three weeks we're gonna see this same chart happen across the country. So what does this mean? What does Omicron mean for the economy? Well, it slows jobs growth. I'll get into that more when I talked about jobs specifically. Reduces consumer spending. Again, I'll develop that more. It's one of the primary reasons that initiated the supply chain crisis and is continuing to hurt supply chain. And again, I'll talk about that. Supply chain is one of the main reasons that we have inflation. And of course, we have to factor in that this is not the last variant. I was surprised when as recently as October, October, some people were saying, not scientists, some observers were saying, well, this is it, where, you know, dollar was in, it ran wild through the economy or through the population and it really affected the economy. But we should be safe from now on. Of course that's not true. And as any epidemiologist will tell you, and I think we've all become amateur epidemiologists through this, we're gonna have successive waves of COVID. Hopefully there will be less virulent and hopefully it'll just kind of relegate itself to like a flu and we'll get annual or not get annual vaccinations. So COVID Omicron continues to be the main factor that's suppressing the economy. So let's talk about jobs. I love this illustration because I believe this is from FedEx Field, the Washington football team, and they weren't filling the stands. This is pre-COVID, just because the team wasn't that good. And so they blocked off a bunch of seats so it made it look like the stadium was full. That's kind of the same thing that's going on with jobs right now. A lot of people are saying we're at full employment but we've blocked off seats just because people aren't rushing into the workforce, just because people have fallen out of the workforce doesn't mean in my opinion, we're at full employment. And a lot of people agree with that. Still job growth is not bad. Couple hundred thousand in December, November. This is just a quick view that shows that jobs added are really starting to slow. If we're really going to get back to a healthy pre-COVID level of employment, we should at least add three or 400,000 jobs, which is possible once COVID Omicron simmers down assuming we don't get new and worse variants. Just so you didn't hear it from me. And again, COVID is boss. This is Daniel Zhao, who labor economists I respect, works for Glassdoor. In December, and we just got this information on Friday, the slowdown in job growth, which was still positive but slow, is driven by leisure and hospitality. We're still a good three, 500,000 jobs short there. They're adding jobs very slowly because obviously because of Omicron. People don't want to travel. People don't want to shop. A lot of people are very hesitant. Of course, a lot of people aren't very hesitant, but a lot of people are hesitant to engage in the service sector. That also affects retail. People don't want to go to stores as much. Healthcare, which I'll talk about in a bit. And even education, we hear about schools opening and students going back to work, but we're still very low as far as education employment goes. A lot of teachers support staff have not been hired back. Participation is stagnated. We are not getting a lot of people flowing back into the workforce. We're essentially trying to employ people who still want to get a job, but a lot of people, especially older people who fear COVID have retired early. This chart I'll explain really talks about what a weird job situation is right now. In November, we had the highest number of people quitting jobs on record. Why? Broken record because of Omicron. A lot of people don't want to go to work if they risk infection or they can't get childcare because Omicron is suppressing childcare spots or they're taking care of a relative who's sick with COVID. The flip side of that, which is very different is a lot of people can afford to quit because of all the stimulus we've gotten because national savings are very high. If you can afford not to work and you don't want to go to work in a COVID workplace that may be riddled with COVID, you're not going to work. The tremendous paradox of this moment is that we have incredibly high job openings. It's hit the record a few times in the last four months and at the same time people are quitting. Again, most of that is due to COVID. So just to recap, unemployment rate technically is 3.9%. But again, when you factor in the number of people still out of work, 3.6 million, we're really not at full employment. If we had projected the number of jobs we should have without COVID would be around 6 million jobs that are open right now. So we really have to take some of these numbers with a grain of salt. On the other hand, we have strong wage growth. Employers are paying more to retain into higher workers. As I mentioned, participation is stagnant. We need to get more people going back to the workforce that's probably not gonna happen until COVID drops. So let's look at consumer spending. That stack of bills there represents $5 trillion, which is the amount of federal stimulus that has been either done through direct payments or through like small business support and other programs. So a tremendous amount of money has gone into consumers' pocketbooks. Why is consumer spending so important? 70% of the economy is consumer spending. That is radically changed from 40 years ago when manufacturing, for example, had a much larger share. But we're a consumer economy right now, for better or worse. I'm gonna show you three charts and these really get at the crux of not just consumer spending, but the economy. Personal consumption expenditures is consumer spending. And as you can see, and I threw in that arrow for the trend, we are far above trend in consumer spending right now. Even adjusted for inflation, we're far above trend. Why are we? Because of the $5 trillion that's been pumped into the economy. And generally because wages are strong. The reason why we're above trend is spending on goods is so high. Again, goods and services make up consumer spending. People are spending a lot on goods for a lot of reasons. One reason is they're spending more time at home, they're working from home, they're improving their home. The other reason is they can't spend on services because why COVID has reduced demand for services and even service providers, many of whom have gone out of business or who are operating in a fraction of where they were before. So consumer spending doing very well but we're still far below trend as far as services go. Goods is what's bailing out the economy and causing the expansion we have right now. As I mentioned before, wages are going up. That's gonna keep consumer spending going well. One thing that's very interesting in this is this is both a reason why, well, this is a main reason why a lot of people are quitting because people who switched jobs in the top line, that brown line is wage increases by people who switched jobs. It's much higher than just the average. So people are being paid a premium right now to switch jobs and even to wait for jobs to rise. Now, how many people are doing that? It's hard to say, but it's enough that it makes a significant change in this chart. So CPI inflation, the December read just came out this morning. Here's a political cartoon. It's funny, but obviously inflation is very serious. It went up again. Just two months ago, people thought it was gonna drop in December, but as things like supply chain, COVID impacts become more pernicious, inflation has gone up. This is the read from this morning, 7%. We haven't seen an inflation read this high since 1982. I remember the high inflation of the 70s and 80s and we're not in that kind of long-term, meaning multi-year kind of inflation. We don't see a wage price spiral, for example, but it's still very high. Broken record, COVID sensitive sectors are the main reason still why inflation is so high. When you add in energy, which thankfully started to fall down, supply chain constrained prices, which are mainly because of COVID and energy prices are the main reason why inflation is so high. It's something that economists do. You talk about headline inflation and core inflation. Core inflation backs out volatile food and energy prices. And we talk about that a lot. Even if you do that, inflation is higher now than it was. The last time it was this high, core inflation was the early 90s. I have a Twitter account, which I hope you will follow, Robert Frick NFCU, in which I try and put perspective on a lot of things. When economists and commentators in the media talk about core inflation, it doesn't matter to consumers. Matter of fact, the two things that consumers feel the most pain are at the pumpkin and the grocery store. So this is my tweet, trying to do a little satire, how much consumers care about core versus inflation. I don't care at all. As Tom mentioned, I'm quoted a lot in the media. This is from a story this morning in MarketWatch, MoneyWatch rather. As you see, I talk about we're at a high level of inflation, which is likely to persist for a while. Probably shouldn't go higher, at least not much higher. And if you see in the bottom paragraph, I talk about consumers and how this affects consumers. I'm not an advocate for consumers, but I do report on how trends affect consumers because obviously we wanna talk about things that are affecting our members and our members reflect the general population. And we have to recognize that lower income people, and again, the veterans population reflects the general population, but lower income people are really hurt by inflation right now. And we shouldn't dismiss that. We should make inflation a top priority, especially because of that. There are indications that inflation is easing. Manufacturing prices are starting to go down. That's good, but again, likely to remain persistent at least for the few months, around 7%. One of the interesting things, pardon the salty language, I did not write the headline, is one of the main reasons behind inflation is this extremely, I'm gonna say absurd situation in which we can't get microchips to finish cars or to build cars. There are literally tens of thousands of cars in storage waiting for microchips. The auto industry blew it. The government so far hasn't lit a fire under overseas chip makers who are the main ones who supply auto chips. The main reason, the single biggest reason why inflation was up so much in December was used car prices. And that's because used cars are at a premium because they're not building enough new cars. So this is definitely gonna persist for months and certainly it's gonna be a problem through next year. People are still thinking inflation is gonna drop to about between three and 4% by mid-year. I believe that when I see it, I was one of the economists who was wrong in forecasting it would have been down by now. Nobody expected the supply chain to be such an issue. So let's talk about the federal government's actions right now. People focus I think too much on the fact that the Fed, the Federal Reserve got inflation wrong and probably should have been doing things earlier to address it. Nobody knew inflation was gonna be this high. I mean, it's almost a black swan event. No one knew how fragile the supply chain was. So this is from just six weeks ago when we were thinking rates which are now at zero, the federal funds rate, the Fed was gonna increase rates twice next year starting in June. Just last week, rates are gonna go up three times starting in May. And a lot of people say four times and the Fed is gonna do other things to really attack inflation. Let's hope they're right. In the past they've been too quick on the trigger to attack inflation which is cut short expansions and hurt consumers and job seekers. So getting back, so that's a quick view of the economy right now. So I wanna look at strategic lessons we've learned and now we're learning. Let's look at supply chain first. I know I'm sure that many of you know a lot more about supply chain, military supply chain especially than I do. I had a friend who was an officer, naval officer who served two years in basically in the Pacific and his main job was coordinating supply among many bases in many countries. And he is essentially doing a face plant right now on how bad the civilian supply chain in the US has gotten. It surprised him, but he can't believe it's as bad as it is. He gives civilian side supply chain a great at. I'm not gonna grade the other four things, the other three things we're gonna talk about but it's horrendous. And we thought it was gonna be fixed by now it's not close to being fixed. I spoke to a professor of supply chain management and he gave me a great analogy, a great metaphor and I am a sucker for great metaphors. He talked about a glass bridge in China and here's a picture of it. And he said that essentially we built a glass bridge for our supply chain. We made it thinner and more delicate. And he said, imagine trying to drive trucks over this glass bridge. It's gonna collapse and that's basically what's happened to the supply chain. Companies, corporations, retailers, shippers, inventory, warehousing people that kept focusing on just-in-time inventory or just-in-time delivery, small and smaller warehouse space. And in doing so, they made delivery much cheaper but they made the supply chain fragile. And what we've seen now is there's a different demand and so there wasn't a lot of stuff getting shipped two years ago because COVID was just started then a surge in demand. So instead of people walking across the bridge you had buses of people going across the bridge and the bridge failed. It's really a problem right now. I love this headline because it summarizes all the things I've been reading about how we're gonna affect the supply chain. Some people say more government, some people say less government, some people blame the government, some people blame companies, some people blame overseas shipping. It's all of those things. And that's what makes it such a complex problem. It is gonna get fixed. There's some indications. Jay Powell, chairman of the Fed said yesterday I think that we're starting to see some snowflakes but we don't have yet a snowstorm of improvement in the supply chain. Let's transition to the workforce. This is something that I follow very closely. One of my basically three areas of expertise is looking at the job market. This is a problem. The volatility in the workforce, as I mentioned when I talked about jobs a lot of people quitting, a lot of people falling out. This is really hurting the economy right now. Yes, a lot of it's because of COVID but there are other reasons why our workforce is so volatile compared to other countries who are actually seeing less of an economic impact because their workforce is more stable. I think there are gonna be books written about this in the future but for now labor economists I think are giving us some really good information about this. So this is the chart from before. So many people are quitting despite so many job openings. Why are so many people quitting? Yeah, Omicron Delta is a factor, maybe the major factor but one of the big factors is we don't pay Americans that much. Especially the lower 50% of wage earners do not make a lot of money. People are gonna stick with a job a lot. There gonna be a lot more tenacious sticking with the job if they're making more money. It's just a fact. This chart shows how much of gross domestic income which is basically how much other companies make goes to wages and salaries. You can see it's been nose diving really since the 1970s. We've seen an increase. It really hit a low point kind of at the worst of the recovery from the Great Recession. It's come back up but it's kind of leveling out now. We don't pay our people a lot of money, lower income people. One of the things that has been suggested to increase stickiness of people and their jobs is better education. As we can see people with low education don't make a lot of money and these are the people who are most likely to quit their jobs when things get tough like during the pandemic. Other countries with better education and better career paths have a much more stable workforce. Another thing which I'm gonna throw out and this is gonna make me look like I'm like maybe very progressive, I'm not. I really try to just call them as I see them. All the federal stimulus that was given to low interest rates, $6 trillion pushed in the economy. Most of that helped the stock market which helped a lot of the people in the top 1%, the top 10%. Obviously the stock market has been great. We had a slight dip when COVID first started but now it's booming and a lot of that is because a lot of the measures put in place by the Fed have pumped up the stock market and so it pumped up the wealth of the top, certainly 10%. But even the 50 to 90% have gone up. Why is the bottom 50% so low? They hardly own any stocks. So yeah, they got a lot of stimulus and they pretty much spent it already but the long lasting effect is really more wealth inequality. So let's look at the government's role in all of this. Again, I'm like grading these but I'd give the government's role a solid B. So if you look at our two most recent recessions, the Great Recession, 2008, 2009, it took 10 years for us to recover from that and that was a long slog and we're recovering actually much more quickly from an even deeper recession. So why is that? Well, a lot of it, most of it has to do with government spending. We only spent a trillion dollars basically. The Fed did low interest rates and quantitative easing which means they injected money in the economy but as far as just giving money to people and businesses and again, people, consumer spending, 70% of the economy, we didn't do a whole lot. We've done much, much more this time, $5 trillion worth and that's the reason why our recovery is going relatively well. So I give the government kudos. Did the government spend too much? Yeah, the government probably spent too much. In hindsight, it's easy to say that. A lot of people got stimulus checks who didn't need it. I have three daughters all gainfully employed. None of them spent the money that they got. My oldest daughter put money in my granddaughter's college account. My two other daughters, one used to finish off spending down her student loans. The other one just banked it. So yeah, did we spend too much? We did. Is the consequence of that a tremendous burden of interest payments by the federal debt? We have to remember that interest rates are so low right now that actually the amount of money we're spending on the debt, interest on the debt is a lot less than it was even a few years ago. So yeah, we spent too much in hindsight. We probably gave too much to people who didn't need it. Still it's helping bail us out of this, very deep recession pretty quickly. So finally, I'd like to talk about pandemic preparedness. This is a sensitive subject for a lot of people. No, I know the military has a vaccine mandate. And I will talk a little bit about mandates in a bit, but let's look about how well prepared we were for the pandemic. My middle daughter works in healthcare. She's a cardiac rehab. She has seen a lot of her friends who were nurses at the hospital, which is adjacent to where she were, quit because the strain is just too much. With every successive wave of COVID, more and more people are leaving nursing home care, nursing in the medical field. It's not like they leave and then come back when there's a dip in COVID cases, they're beaten up. A lot of them have chosen new career paths. One of the main reasons why jobs haven't bounced back more quickly is because we have this lack of people who wanna work in healthcare. Imagine that going to school for say five years to be a high quality nurse, a well-educated nurse, and then giving up that profession. Tens of thousands of healthcare workers are doing that. That's a problem. We're not doing enough either in private industry and government to keep people, to realize the stress and strain of people in healthcare. Another thing that's I think a failure in our pandemic preparedness is richer, better educated people have gotten more vaccinations and lower income, less educated people are dying at higher rates. Now, part of that has to do with education and it tends that people who are more educated and more likely to get vaccinated. That makes, oops, sorry, that makes complete sense to me. But when we revise our pandemic preparedness plan we need to address this discrepancy which is really something I think is shameful. As I'm sure is the case with all of you I know people who have been hospitalized for COVID I had a close relative died from COVID. She was elderly, but the reason why she got COVID was because other relatives didn't get vaccinated and gave COVID to her and she died last year. So we need to do better with education. We need to push vaccination information and availability down to people especially in metro areas of lower incomes. Now, I remember this actually and this really struck me when George Bush read a book about the 1918 flu which in many ways is a blueprint for what we're going through right now. If we wait for a pandemic to appear it will be too late to prepare. We had a playbook. We didn't follow it as well as we should have and need a better playbook now. We can obviously do a lot better. So just the personal on a personal note one of my earliest memories is lining up at the local high school with my family and my mom, my dad, my older brother. And as usual, he and I were wrestling and cutting up and we were impatient and we got our polio vaccine. I think it was via a sugar cube. And I remember my mother who died at 95 last year after a wonderful long life told us to shape up Jim, shape up Bob. I know people who were crippled by polio and she named them and she showed us pictures later when we got home and I will never forget that. We are not making international duty to get vaccinated. I'm not gonna take one side or the other on that but I will say from an economic perspective it certainly makes sense. You know, we can certainly debate, you know personal liberty and stuff like that but when it comes to pandemic preparedness we need to do better in some way. So we don't have 800,000 and I'm sure it's gonna top a million probably this year people dying from a pandemic. So just to recap supply chain, we can fix that. I have no question but the government's gonna have to take a role. They're probably going to, you know we have certainly the levers in place. The Merchant Marine Act, you know the Jones Act is one thing that kind of cripples I think in many ways supply chain. The Federal Merit Time Commission is very powerful and they might be able to make some changes. So we can fix supply chain. We can make sure the supply chain issues we have now don't happen. Most of our goods that come through the Pacific are in the parts of Long Beach and LA and they are among the worst ports for efficiency in the world. You know, I think number one is in Singapore we are way down in the 300s as far as supply chain goes. Workforce, this is a long-term problem. We need to get better career paths. We probably need to do more for healthcare and childcare. So people stick to their jobs more and don't hurt the economy so much. Government's done a pretty good role. They obviously need to do more of supply chain. Pandemic preparedness, I'm not gonna go out on a limb but we all know that we can do better. So that's my view of the world right now and the strategic lessons. Thank you again for inviting me to speak with you and I welcome your questions. Bob, I asked the first question and for the people in the lecture opportunity if you have questions, put them in the chat. If you wanna raise your hand, I can take you off mute but I'll ask the first question. I know that the Port of Los Angeles is mandated open 24 hours. What more can the government do to fix the supply chain?