April 20, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Taylor St. Germain:

Hi, everyone. My name is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR, your apolitical and unbiased source of economic intelligence. Today, we have a guest joining us, which we’re excited about. My colleague, Tara, she’s an economist and public speaker like myself. So Tara is traveling the country, delivering economic presentations, consulting with our individual clients, essentially, and equal to me. And so she’s got different groups of clients. She hears different things. So I wanted you to get her perspective on what she’s seeing out there.

And today, I really wanted to bring up the idea of profitless prosperity. It’s something we talked about a while back. We delivered a presentation in the first quarter related to this concept of profitless prosperity. But in the wake of the situation in Iran, higher oil prices, we continue to hear higher costs, copper, steel, aluminum. I wanted to bring this conversation back into the fold because I think it’s very important that we’re considering this as we’re planning into the future. Let me just remind you all before I get Tara’s perspective that ITR Economics is forecasting growth in ’26, ’27, and ’28, as far as it relates to the broader economy, the GDP economy. But one of the challenges that we’ll experience during this growth is this concept of profitless prosperity. So Tara, hoping you can just summarize profitless prosperity for us and for everyone listening in here.

Tara Bayke:

Yeah, absolutely. So first of all, thank you for having me as a guest on trends talk very excited to be here. But really, the idea of profitless prosperity is fairly simple that growth that you just mentioned that we’re seeing across different markets, different sectors of the economy and really the economy as a whole, that’s likely going to translate into increased revenues for businesses. So on one hand, this is a good thing.

But where the profit less part comes in, we covered the prosperity part. But where that comes in is that if businesses are not taking a hard look at their margins and really protecting themselves in terms of increasing costs, we’re already seeing inflationary pressures that have been building over the past couple of years. If they’re not paying attention and protecting those margins, that can cut into those increased revenues that they’re seeing and really ultimately not be able to benefit from said prosperity that we’re seeing across the board.

Taylor St. Germain:

Yeah, I think that’s a great summary. And for folks out there, the way I just keep it ever so simple is I’m not worried about your sales and revenue. Like Tara said, you should grow with the growth we see in the economy, but margins is a whole other story in the face of these higher costs. And I think both Tara and I on this TrendsTalk wanted to highlight where some of these higher costs are coming from.

I’ve been focusing on two in particular material costs. You know, as we look at some of the material cost pressure out there, of course, we have oil trading at $88 per barrel at the time of this of recording. And we have the three 12 growth rate. So that’s the current quarter compared to the same quarter year prior for aluminum’s up 27% for copper. It’s up 26.8%. For steel it’s up 6.4%. So we can see this material inflation, whether it’s demand supply chain disruptions, tariffs, we’re getting that side of the material inflation. So going to have to find solutions to offset these costs. Same thing with electricity on the national average electricity somewhere between five and 6%. That’s with all the data centers. We’ve discussed that in previous trends talks, but even in places, you know, you see the regional differences, Illinois electricity costs are up 12.7% year over year, Pennsylvania, 11.4%. So some of these numbers are getting pretty egregious. So there are a number of different directions these costs pressures are coming from that lead us to this profitless prosperity.

Tara, would you add outside of electricity, outside of material costs, what else is on your mind?

Tara Bayke:

Yeah, I think those are the main ones, but I would also mention labor costs. If anyone’s been taking a look at the labor market recently, it’s been fairly tight for the past few years, and we anticipate that to continue. So the cost of retaining employees, the cost of of course, bringing in new employees, that’s increasing and just adding onto those pressures that you just mentioned as well.

So I would definitely say labor costs and that gradual increase over the next few years, and also AI. Now that’s really going to depend on the type of business, the type of industry that you’re in, but AI is also adding to some of those pressures as well. We’re seeing companies starting to integrate AI into their general systems, and there is an upfront cost to that. So we’re looking to have that help with efficiency, but at the same time, we can ignore that there is an upfront cost to changing anything within your business as well.

Taylor St. Germain:

Yeah, there’s a lot of things to spend money on, but making money is a whole other conversation entirely. And, you know, in folks, I covered AI a little bit last week. And I think Tara’s comments are a perfect extension of that, which is, you know, ITR still forecasting about a 20% increase in the cost of labor through the second half of the decade. And especially for those blue collar workers that AI really isn’t offsetting right now. I think you can see the point of our conversation here, there are just a number of these pressures coming from a number of different directions. And so if we want profit growth, which every business does, we’re going to have to be laser focused on how can we become more productive? How can we use price to offset some of these costs? Otherwise, again, we love sales and revenue growth, it’s important, but it’s not all that exciting if we don’t have profits coming along with it.

And you know, this leads into a broader topic that Tara and the team of economists at ITR have been discussing, which is the Fed, you know, as we look towards the second half of this year, we have inflation both on the CPI consumer price index and the PPI, the producer price index, actually accelerating through the second half of this year, I think it’s going to be very challenging for the Fed to ultimately lift interest rates, the Fed meets next on April 28, and April 29. And that’s when we will have, I should say that’s an FOMC meeting. That’s the next time we’ll hear about interest rates and whether they’re moving or not.

Tara, I’m going to put you on the spot. And we’re going to go on the record here. So I hope both of us are right and agree. But what do you think the Fed does at the next meeting? Do you think the Fed holds rates, drops them, increases them? I guess what are your thoughts on that?

Tara Bayke:

Yeah, well, I definitely wish I had a crystal ball to know exactly what they’re going to do. But I would say just given what you just explained to our audience that we’re not seeing inflationary pressures coming down. We’re not seeing interest rates really coming down. I don’t see the Fed cutting interest rates again.

I still think they are in that wait and see period from the previous cuts that they made to see what exactly the impact will be, particularly because they made those costs to help bolster the labor market. So I think there’s been a little bit of movement there. I don’t think they are quite seeing what they want to see to justify additional cuts. So I’m thinking they’re going to hold steady. Like you said, hopefully, I am right on that. But that’s what I think just based on what I’m saying.

Taylor St. Germain:

Yeah, absolutely. And I’m in the same camp. As you all know, we have our company’s opinion. And I think the company more broadly consensus is that we’re going to see rates hold. We’re allowed to have individual opinions as economists. But I think in this case, Tara and I both agree with consensus of ITR consensus of the broader market, which is, I think that wait and see phrase that you mentioned is really where the Fed’s at. I think I know there’s whispers that maybe towards the end of the year, we could see a move either up or down. And there’s more of a reception to that from the FOMC members. But right now, there’s a lot of uncertainty in the economy, you throw the Iran, the oil price situation, and I think the Fed is going to hold rates at that April meeting. And then we’ll have to see what comes after in June.

So hey, economists don’t always agree. But I guess we can chalk today up to that. And that’s always good news. We love consistency in the world of economics, even if it’s not as exciting. But again, folks, we have growth in our forecast, I know both Tara and I would emphasize, we want you to be ready for the growth that’s coming over the next few years. But we want to make sure you’re protecting yourself, protecting your costs, protecting your margins. That’s just as important to us. So let us know how we can help.

A lot of the data series we mentioned today are in our trends report. So please head over to the trends report and subscribe if you haven’t. Other than that, Tara, thanks for being here. Thanks for jumping on with us. I know folks are probably more excited to see another face hear another voice than just me. So look forward to having you back. And for everyone else, I hope you enjoyed this trends talk, like and subscribe to trends talk wherever you listen to your podcasts. We look forward to seeing you on the next one. Thanks so much. Take care for now.