Don't underestimate the resilience of economy and the consumer, says Ed Yardeni

Added: 2026-05-11

[00:00:00]Joining us now, Ed Yardeni, Yardeni research uh president, frequent guest.

[00:00:04]We have uh we've been through a lot together, Ed. And uh I remember liberation day.

[00:00:10]>> Yeah.

[00:00:10]>> I needled you and said you you you briefly lost your nerve >> briefly.

[00:00:16]>> And then you went right back to where did you what was your 2025 uh target?

[00:00:21]>> Uh 7,000 >> and you had gone down briefly and then it and then it came back. this time you didn't you didn't w you didn't waver you didn't flinch >> which you know tariffs are one thing u >> attacking Iran and and >> well you live I guess >> yeah but $100 $110 Brent >> a lot of reasons >> to maybe not stand firm but but you did and I think you were at were you at 77 >> $7700 >> for 2026 right now and you stuck with that >> now I'm 800 >> manly that was manly >> uh personally I don't know. Am I allowed to say mainly? Anyway, it was manly.

[00:01:00]Now, where are you going?

[00:01:01]>> Well, now I'm using 8,250.

[00:01:04]I've been bullish, but not bullish enough. As it turns out, the the earnings estimates of analysts have been phenomenal. I've never seen anything like it. Uh the first quarter earning season, the we're finishing up now um has uh turned out to be gang busters.

[00:01:19]Not only that, but the analysts are actually raising their estimates for the second, third, and fourth quarters. and the year as a whole they're talking about something like 23% which is a extraordinary uh increase in an economy that's been growing all along. But I I think the key to all this is uh and I've been I've been saying this for some time that don't underestimate the resilience of the economy, the resilience of the consumer and if that's continues to be the case and the same goes for earnings.

[00:01:49]In the past, things have happened where you know it wasn't the wrong move to underestimate the strength of of the consumer or the economy or businesses.

[00:02:04]>> You haven't explained to me. You say don't underestimate it. You haven't asked the explain to me why. And and you know what? I'm going to give you your answer for you. Uh it's ABC D and E.

[00:02:14]It's E. It's it's all the above. It's AI. It's it's the big beautiful bill. It it's the consumers uh you know, we've got a lot of retiring baby boomers and uh >> they're rich.

[00:02:24]>> They're rich. They're $89 trillion in net worth and a lot of them have paid off their mortgages. They're they're spending money.

[00:02:32]>> Why are corporations doing so well?

[00:02:34]>> Well, corporations cash flows at an all-time record high. Corporate profits at all-time record high.

[00:02:38]>> You're not telling me why.

[00:02:39]>> I I think it's because uh the US economy is strong. And not only that, but the global economy is strong.

[00:02:47]>> I still want reasons I because it doesn't always it's not always like that.

[00:02:51]>> Yeah. I you know, I've been doing this for a while and kind of one of the things I've learned over the years is uh we we pay too much attention to Washington and sometimes we don't really really >> in spite of Washington not >> that's exactly it. We've we've done remarkably well despite Washington. And I think the same thing can be said globally. more and more countries around the world that you know entrepreneurs, business people, consumers are just continuing to do what they want to do.

[00:03:18]>> Washington doesn't kill it.

[00:03:20]>> If you're saying in spite of so if they're not actually going out of their way to make it difficult for businesses, then the the US is going to flourish.

[00:03:29]>> Well, I I think clearly we've got a administration that's deregulating, that's trying to stimulate the economy.

[00:03:36]I mean the reality is under Biden a lot of money was spent to build infrastructure in manufacturing for semiconductors and now under the current administration we're seeing the same kind of push to you know for if nothing else for national security reasons to bring the supply chains back to the United States. So it's all extremely stimulative. We also have the big beautiful bill which is stimulative not just for the consumers with tax refunds but also with 100% depreciation, >> right? 100% depreciation. When does uh input cost because of $110 rent oil >> let's say that goes on let's say it goes on for another six months. Well, I think one of the things that's different between now and what happened in 2022 when we had a big spike in inflation and a big spike in uh in in energy is we're not seeing a wage price spiral. Wage inflation really took off in 2122.

[00:04:36]Remember there's a big shortage of of labor and now that's just not the case and wage inflation's moderated quite quite a bit. I think the big story is productivity and I've been talking about this being the roaring 2020s and the similarities with the 1920s is tremendous technological innovation that led to enormous productivity and productivity is very it makes everything better. It makes growth better, inflation lower. Uh it's great for corporate profits and it's uh it actually boosts wages relative to prices. I wonder if maybe that's the half empty view of of AI is that people are just happy to have their jobs.

[00:05:14]They're not asking for for more money.

[00:05:17]>> Yeah. I I think AI and on and a net balance is going to be creating jobs.

[00:05:21]Come on.

[00:05:21]>> Instead instead of coders, we need prompters. I mean, we need people to actually monitor these systems. You can't just kind of leave them on their own in this. But at this point, um, even though we're steady at 4.3% unemployment, you're not seeing a lot of of hiring and therefore you can people ask for raises right now.

[00:05:39]>> I think there's already indications the labor market is improving. We we've seen the past two employment numbers have been very strong.

[00:05:46]>> Why no wage price spiral though? That's what you your surp equilibrium. Supply is equal to demand.

[00:05:57]So we're not seeing a lot of upward pressure or down or downward pressure.

[00:06:00]>> Here's the question about jobs that I often think about. So the the best example of and you we haven't I we haven't talked about this Joe since I haven't seen you in a week.

[00:06:08]>> The best example I think right now about AI creating jobs. Yeah.

[00:06:12]>> In an industry that people thought that was going to lose jobs is actually radiologists around mamograms. I don't know if you followed this story, but everybody thought that mammogs were going to uh be read by computers >> and radiologists were all going to lose their jobs.

[00:06:26]>> Correct.

[00:06:27]>> AI has helped make mammogs so much cheaper. More women happily are getting mammogs.

[00:06:33]>> As a result, uh they need more radiologists to actually look at this stuff and communicate back with the patient to explain what's going on.

[00:06:42]>> The question though that I have about that is, is that a shortterm blip >> right now >> until we get to a point where you could use less radiologists to either communicate it or get the original communicate it or what's going to AI does it not in the moment I get it and I go oh that's an interesting example because it's sort of completely antithetical to what people thought >> but I don't know what that looks like long term >> well you know what's uh really odd is uh everybody knows that uh coders software programmers uh are are losing jobs except for one anomaly here and and that is if you look at Indeed job postings for software programmers it's going up.

[00:07:27]Uh so maybe it's there's some software programmers that you don't need anymore and others that you do need. I think a lot of people who are losing jobs are going to find them pretty rapidly and and we've seen in the latest employment report the duration of unemployment is going down. continuing claims uh which we get every single week has been coming down and but >> Richardson though did say last week that the new jobs that are being added are not necessarily great jobs that often they're part-time jobs often they pay less it's smaller businesses that are hiring they don't always come with all the benefits of the big company's jobs and and that was just what the last >> well you know a lot of the job creation has been obviously in healthcare and healthcare is um you know they they pay pretty well there um for various kinds of >> but rationally don't you think to yourself that a company that's going to go spend you name the number on you know sort of redoing all their tech around AI >> think to themselves I'm only spending this money if I'm going to get it back plus+ >> uh or that I'm going to somehow save it in some other way and therefore they have to be thinking that they're >> I think we've had a hiring freeze for really since the beginning of last year and I think a lot of companies said you know what we're >> we have to figure out how this AI works and uh what we can do with it and so they looked all around their firms which is a great way to increase your productivity is to actually see where this kind of technology might work and what they found is that in some instances AI can be used to augment productivity of workers so you don't have to get rid of workers some areas they did let go of workers uh but I think in other areas they've concluded you know, AI is not really relevant to what we're doing in this division. But again, the the labor market numbers themselves speak to the point that I'm making here, and that is things are improving.