What are the key takeaways from this Odd Lots episode?

Key insights include: **Labor Market Mismatch:** Prime age labor force participation remains elevated despite rising African American unemployment and reduced college graduate hiring. These patterns reflect structural changes from DOGE government contractor cuts and post-COVID hiring overhang rather than cyclical demand weakness. Low layoff rates and solid wage growth support this interpretation, indicating continued labor market tightness beneath surface-level softening indicators.; **Tariff Implementation Lag:** Tariff impacts require 12-month lags before materializing in prices, matching Peterson Institute forecasts from 18 months prior. Companies need time to decide supplier changes, production relocation, inventory management, and pricing strategies. Anti-migration policy effects follow similar delayed patterns as workers and families make irreversible decisions about employment, relocation, and legal status under uncertainty.; **Weakened Monetary Transmission:** Fed rate changes transmit less effectively through three channels: private credit growth bypasses traditional banking, yield curve relationships weaken, and Fed credibility diminishes under political pressure. Housing construction showed minimal response to recent tightening despite historically being interest-rate sensitive. This requires larger rate moves to achieve equivalent tightening effects compared to previous decades.

What did Adam Posen discuss on Odd Lots?

Adam Posen, President of the Peterson Institute, argues inflation will surge back to 4% by year-end 2026, driven by tariffs, anti-migration policies, fiscal expansion, weakened Fed credibility, and reduced monetary policy transmission. He contends labor market softness reflects structural mismatch rather than demand weakness, while AI spending and geopolitical uncertainty reshape investment patterns. Key topics include: **Labor Market Mismatch:** Prime age labor force participation remains elevated despite rising African American unemployment and reduced college graduate hiring. These patterns reflect structural changes from DOGE government contractor cuts and post-COVID hiring overhang rather than cyclical demand weakness. Low layoff rates and solid wage growth support this interpretation, indicating continued labor market tightness beneath surface-level softening indicators.; **Tariff Implementation Lag:** Tariff impacts require 12-month lags before materializing in prices, matching Peterson Institute forecasts from 18 months prior. Companies need time to decide supplier changes, production relocation, inventory management, and pricing strategies. Anti-migration policy effects follow similar delayed patterns as workers and families make irreversible decisions about employment, relocation, and legal status under uncertainty..

How long is this episode of Odd Lots?

This episode is 56 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

Odd Lots

Why Adam Posen Thinks Inflation Will Surge Back to 4%

February 13, 2026

56 min episode · 2 min read

Adam Posen

Episode

56 min

Read time

2 min

Topics

Career Growth, Productivity, Relationships

AI-Generated Summary

Published Feb 13, 2026

Key Takeaways

✓Labor Market Mismatch: Prime age labor force participation remains elevated despite rising African American unemployment and reduced college graduate hiring. These patterns reflect structural changes from DOGE government contractor cuts and post-COVID hiring overhang rather than cyclical demand weakness. Low layoff rates and solid wage growth support this interpretation, indicating continued labor market tightness beneath surface-level softening indicators.
✓Tariff Implementation Lag: Tariff impacts require 12-month lags before materializing in prices, matching Peterson Institute forecasts from 18 months prior. Companies need time to decide supplier changes, production relocation, inventory management, and pricing strategies. Anti-migration policy effects follow similar delayed patterns as workers and families make irreversible decisions about employment, relocation, and legal status under uncertainty.
✓Weakened Monetary Transmission: Fed rate changes transmit less effectively through three channels: private credit growth bypasses traditional banking, yield curve relationships weaken, and Fed credibility diminishes under political pressure. Housing construction showed minimal response to recent tightening despite historically being interest-rate sensitive. This requires larger rate moves to achieve equivalent tightening effects compared to previous decades.
✓AI Productivity Timing: AI investment generates real income gains before disinflationary effects materialize, following historical general-purpose technology adoption patterns. Businesses require years to restructure production processes, hiring practices, and product offerings before productivity gains translate to lower prices. The Internet showed similar patterns in the 1990s, with consumer benefits preceding measurable statistical productivity improvements by several years.
✓European Security Spending: European countries increase military expenditure in direct proportion to proximity to Russia, creating inflationary fiscal pressures. Germany, France, Poland, Spain, Italy, and Netherlands form new leadership committee bypassing traditional EU unanimity requirements to accelerate defense buildups. This represents fundamental shift from decades of relying on US security guarantees, requiring infrastructure investments in communications, satellites, and military capabilities.

What It Covers

Adam Posen, President of the Peterson Institute, argues inflation will surge back to 4% by year-end 2026, driven by tariffs, anti-migration policies, fiscal expansion, weakened Fed credibility, and reduced monetary policy transmission. He contends labor market softness reflects structural mismatch rather than demand weakness, while AI spending and geopolitical uncertainty reshape investment patterns.

Key Questions Answered

•Labor Market Mismatch: Prime age labor force participation remains elevated despite rising African American unemployment and reduced college graduate hiring. These patterns reflect structural changes from DOGE government contractor cuts and post-COVID hiring overhang rather than cyclical demand weakness. Low layoff rates and solid wage growth support this interpretation, indicating continued labor market tightness beneath surface-level softening indicators.
•Tariff Implementation Lag: Tariff impacts require 12-month lags before materializing in prices, matching Peterson Institute forecasts from 18 months prior. Companies need time to decide supplier changes, production relocation, inventory management, and pricing strategies. Anti-migration policy effects follow similar delayed patterns as workers and families make irreversible decisions about employment, relocation, and legal status under uncertainty.
•Weakened Monetary Transmission: Fed rate changes transmit less effectively through three channels: private credit growth bypasses traditional banking, yield curve relationships weaken, and Fed credibility diminishes under political pressure. Housing construction showed minimal response to recent tightening despite historically being interest-rate sensitive. This requires larger rate moves to achieve equivalent tightening effects compared to previous decades.
•AI Productivity Timing: AI investment generates real income gains before disinflationary effects materialize, following historical general-purpose technology adoption patterns. Businesses require years to restructure production processes, hiring practices, and product offerings before productivity gains translate to lower prices. The Internet showed similar patterns in the 1990s, with consumer benefits preceding measurable statistical productivity improvements by several years.
•European Security Spending: European countries increase military expenditure in direct proportion to proximity to Russia, creating inflationary fiscal pressures. Germany, France, Poland, Spain, Italy, and Netherlands form new leadership committee bypassing traditional EU unanimity requirements to accelerate defense buildups. This represents fundamental shift from decades of relying on US security guarantees, requiring infrastructure investments in communications, satellites, and military capabilities.

Notable Moment

Posen reveals Canada discovered it has zero Internet connectivity independent of US infrastructure, with all data flowing through American satellites or cables. This realization exemplifies how countries previously took US provision of basic economic and security infrastructure for granted, now recognizing weaponization risk and requiring massive capital expenditures to build alternative systems.

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Episode Transcript

UKG. Their HR, pay, and workforce management tools help business leaders empower their people. Because when work works, everything works. Learn more at ukg.com/work. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools, and customer support that actually helps. Go to public.com/market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com/market. Ad paid for by Public Holdings, brokered services by Public Investing member FINRA SIPC, advisory services by Public Advisors, SEC registered adviser, crypto services by Zero Hash. All investing involves risk of loss. See complete disclosures at public.com/disclosures. With 4imprint, finding the right promo products can be easy. They call it 4imprint certainty, which means you get free samples, expert help, art assistance, and their assurance your logo looks great. 4imprint offers thousands of options to choose from, including branded apparel, drinkware, outdoor, and more. And it's backed by their 360 degree guarantee. That's 4imprint's promise that your order will be packed with care and delivered on time. Need your order faster? 4imprint offers quick turnaround options too. Visit 4imprint.com to explore. 4imprint, for certain. Bloomberg Audio Studios. Podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, you know, future economy, it's always uncertain. Path of the path of inflation, path of employment, always big debates. I think what's really interesting right now compared to a few years ago maybe is, you know, at various times, it's like inflation is gonna come down, but there's a fight over how fast. Right? And now you have a situation in which there are people who argue both sides. Some people is like, oh, no. We're on a you know, we're heading down, the sort of yield to the camp, etcetera. And others are like, look. We're reaccelerating. It's gonna get hot again, and we're recording this February 11. We just had a fairly strong jobs print, etcetera. And so some people are making the reacceleration argument. We are so back. So back. Well, that jobs report. I mean, it was a blowout number. So Yeah. A 130,000 jobs added in January versus expectations for 65,000. And even if you drill down into it, like, it looks pretty good. Right? But you're absolutely right. So we used to argue about how far we would travel in one direction, you know, inflation. Yeah. Is it gonna be 4%? Is it gonna be 5%? Whatever. And now we're sort of arguing about …

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