WEBVTT - Economy Up: Mark Hamrick Talks To A&G

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<v Speaker 1>Good news in the US economy.

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<v Speaker 2>It grew by an annual rate of nearly five percent

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<v Speaker 2>in the third quarter, beating expectations.

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<v Speaker 1>Well, that's a short clip.

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<v Speaker 2>Five percent is a high number, and that's why we

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<v Speaker 2>need to talk to a senior economic analyst, not a

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<v Speaker 2>junior economconomic analyst who wouldn't know a prime interest rate

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<v Speaker 2>if we walked in the room and slapped him in

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<v Speaker 2>the face. We're talking a senior economic analysts like Mark

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<v Speaker 2>Hamrick with who is the Washington Borough chief with bankrate

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<v Speaker 2>dot com. Mark, Welcome to the Armstrong in Getty Shaw.

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<v Speaker 1>Are you good to be with you, gentlemen?

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<v Speaker 3>Thanks for having me.

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<v Speaker 1>What are you dressing as for Halloween?

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<v Speaker 3>Oh? I can just go as myself. That scares plenty

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<v Speaker 3>of upol and it really saves money.

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<v Speaker 1>Right, So five percent quarterly growth is huge, isn't it?

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<v Speaker 3>For sure? This is annualized, So what we do is

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<v Speaker 3>take the number and multiply it by four to get

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<v Speaker 3>what it would be for the full year. But you know,

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<v Speaker 3>the long term trend is about one point eight or

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<v Speaker 3>two percent, So we were twice the growth rate of

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<v Speaker 3>the previous quarter and above the long term trend. But

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<v Speaker 3>you know, as I wrote in the note that I

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<v Speaker 3>shared with our friends sort of across the spectrum and

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<v Speaker 3>then LinkedIn and elsewhere, take a good look at that,

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<v Speaker 3>because you won't be seeing a number that high again

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<v Speaker 3>for a good while more likely.

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<v Speaker 2>Okay, so why is that? And I know the whole

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<v Speaker 2>raisin interest rates thing. The point to that is to

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<v Speaker 2>slow down the economy, to try to you know, stop inflation.

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<v Speaker 2>And then we're growing this fast. So yeah, what's going

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<v Speaker 2>on there?

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<v Speaker 3>Sure? Well, first of all, let's acknowledge and if we're

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<v Speaker 3>in a mood to celebrate the fact the economy has

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<v Speaker 3>proven more resilient and ultimately robust than most of would

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<v Speaker 3>have given that credit. And in our quarterly economy surveys

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<v Speaker 3>that we've been doing for many years, we go back

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<v Speaker 3>to the first quarter of last year twenty twenty two,

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<v Speaker 3>when they were starting to say collectively that the risk

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<v Speaker 3>of imminent recession we're elevated. And here we are in

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<v Speaker 3>the fourth quarter of twenty three and we don't have

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<v Speaker 3>a recession that is quantifiable occurring right now. So a

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<v Speaker 3>lot of things have been done to sort of get

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<v Speaker 3>us where we are, and there are a lot of

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<v Speaker 3>things being done to sort of unwind the parts of

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<v Speaker 3>that that can be unwound. As you know, there was

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<v Speaker 3>a lot of fiscal stimulus put into the system by

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<v Speaker 3>two congresses and two presidents in response to the pandemic.

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<v Speaker 3>We had interest rates at record low levels, not only

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<v Speaker 3>during the pandemic but for the broader part of the

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<v Speaker 3>previous fifteen years, sort of barely deviating from that in

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<v Speaker 3>between the pandemic and the Great Financial Crisis. And there

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<v Speaker 3>is some long term federal spending related to infrastructure, etc.

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<v Speaker 3>That are not making a huge difference, but do make

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<v Speaker 3>a difference on the margin. The other part is that

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<v Speaker 3>consumers really did accumulate more savings than they would have

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<v Speaker 3>had a tendency to do during the pandemic. Part of

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<v Speaker 3>that was forced, part of that was physical assistance in

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<v Speaker 3>the form of things like the child tax credit. And

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<v Speaker 3>as we've seen, there has been some component of revenge spending,

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<v Speaker 3>as witnessed by the would be fistfights that are occurring

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<v Speaker 3>on airlines at an airport, so.

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<v Speaker 1>All revenge spending.

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<v Speaker 2>So a lot of economics is you know, you're an

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<v Speaker 2>expert on this, but is you know, pretty hard numbers,

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<v Speaker 2>nuts and bolts, you get them. This many bushels of

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<v Speaker 2>corner this many, you know whatever, But a lot of

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<v Speaker 2>it is an emotion, especially when you get to the

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<v Speaker 2>consumer spending, which is two thirds of our economy. That's

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<v Speaker 2>just a motion, and so you think we had money

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<v Speaker 2>burning a hole in our pocket. My concern is what

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<v Speaker 2>the way these numbers don't fit together. Of course, on

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<v Speaker 2>the consumer spending is I'm not feeling wealthy, and nobody

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<v Speaker 2>I know is. And every time you go to the

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<v Speaker 2>grocery store, or go through a drive through at McDonald's,

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<v Speaker 2>or get gas or whatever, you're shocked by the price.

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<v Speaker 2>Yet we continue to spend. What's the psychology going on there?

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<v Speaker 3>Sure well you weren't alone in any of those places,

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<v Speaker 3>I'm guessing, so you have plenty of company. That's one thing.

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<v Speaker 3>The other part is inflation elevates the dollar adjusted or

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<v Speaker 3>measured amounts of spending just a loan. So if we

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<v Speaker 3>have inflation that's close to a four percent annual increase,

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<v Speaker 3>that helps to get you some of the increase. But

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<v Speaker 3>the pointing has been up on an inflation adjusted basis

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<v Speaker 3>as well. So what I would say is, and I

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<v Speaker 3>think that's a very good point you're making that you

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<v Speaker 3>know we are not all go sort of an ancient

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<v Speaker 3>cultural reference or pop culture reference here. We're not all

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<v Speaker 3>mister Spock, right, We're not all acting only with logic

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<v Speaker 3>and so, and you know, the experts in psychology would

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<v Speaker 3>tell us that most of the decisions we make are

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<v Speaker 3>actually sort of emotionally based and not sort of you know,

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<v Speaker 3>using the avacus to figure it out. So I do

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<v Speaker 3>think that there's a big part of that absolutely, and

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<v Speaker 3>it's not sustainable at its current pace. I think that's

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<v Speaker 3>the most important part of it.

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<v Speaker 2>Well, and in the economy, can't count on a Taylor

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<v Speaker 2>Swift concert every summer.

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<v Speaker 3>Either, That's right. Absolutely.

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<v Speaker 2>I'm a out of concern is with the consumer spending

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<v Speaker 2>because I just had this thing in front of me,

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<v Speaker 2>the number of people, it's a high number of people

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<v Speaker 2>that are dipping into their four to one k's for

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<v Speaker 2>emergency spending or putting it on credit cards. How much

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<v Speaker 2>of the consumer spending is stuff we really shouldn't be spending.

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<v Speaker 3>Well, what I would I would sort of reverse engineer

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<v Speaker 3>that and say that, you know, we survey on these

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<v Speaker 3>sorts of issues at bank rate over the years all

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<v Speaker 3>the time, and the reality is that most Americans are

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<v Speaker 3>living paycheck to paycheck, if they were not spending on

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<v Speaker 3>all those things and they had some cushion and their finances,

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<v Speaker 3>which you believe a good number of people do, they

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<v Speaker 3>could be channeling that money to not only emergency savings,

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<v Speaker 3>but two retirement savings. And one of the more recent

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<v Speaker 3>surveys we did indicated that the majority of Americans feel

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<v Speaker 3>that they are behind on their retirement savings and perhaps

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<v Speaker 3>no surprise, those who are more senior ie realizing they

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<v Speaker 3>might actually get to a retirement phase or the risk

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<v Speaker 3>is there, are feeling that more acutely. So what you know,

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<v Speaker 3>the other part is, you know, we've been talking lately

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<v Speaker 3>and I don't know if you guys have heard this phrase,

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<v Speaker 3>but it's come up in some of the discussions that

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<v Speaker 3>people have sort of come to us about. And we'll

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<v Speaker 3>see whether it has any stickiness or residence. And that

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<v Speaker 3>is a concept that's being referred to as soft saving

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<v Speaker 3>or savings, and this is an idea that it's being

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<v Speaker 3>associated with sort of the youngest cohort er age group

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<v Speaker 3>that sort of adults and that is eighteen to twenty

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<v Speaker 3>six gen z. And what they're sort of being associated

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<v Speaker 3>with is an idea that essentially, you should try to

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<v Speaker 3>live for today and not think the career is the

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<v Speaker 3>be all end all.

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<v Speaker 1>Yeah, thanks thanks hire late News.

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<v Speaker 2>Yeah, well, I think there are ancient fables about that

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<v Speaker 2>attitude and how well it works out.

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<v Speaker 3>Well. I mean, you know, ballance is important, right, and

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<v Speaker 3>I think many of us were reminded about the importance

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<v Speaker 3>of that when we were sort of grappling with life

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<v Speaker 3>death issues during the pandemic. And it's also relevant in

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<v Speaker 3>the discussion of people demanding more from their employers. That

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<v Speaker 3>isn't just about compensation. That it's about, you know, can

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<v Speaker 3>there be some flexibility if that kind of work allows it,

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<v Speaker 3>and you know, four day work weeks and remote work,

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<v Speaker 3>hybrid work. But you know what I would say is

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<v Speaker 3>that to bring it back around to the GDP question,

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<v Speaker 3>we are fortunate that we're still looking at at unemployment

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<v Speaker 3>rate of three point eight percent, and we'll get an

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<v Speaker 3>update on this next Friday. That is remarkably close to

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<v Speaker 3>the historical low three point four percent we had in April,

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<v Speaker 3>that was a fifty three year low. People can logically

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<v Speaker 3>or appropriately debate, you know, the quality of all those

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<v Speaker 3>jobs and the statistics that also point out that there

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<v Speaker 3>are millions of Americans working part time that would like

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<v Speaker 3>to have full time work, millions of Americans who would

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<v Speaker 3>like to have a job but are not looking for one.

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<v Speaker 3>Those are you know, those are issues that are worthy

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<v Speaker 3>of consideration as well. But the reality is the unemployment

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<v Speaker 3>rate is low. We are not in a recession as

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<v Speaker 3>it's as it's defined by those who define such things.

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<v Speaker 3>But that doesn't mean that just because the sun is

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<v Speaker 3>shining today that there won't be rain on down the road,

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<v Speaker 3>and so we should be trying to prioritize our emergency

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<v Speaker 3>savings paying down debt when credit card debt is at

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<v Speaker 3>the highest level we've ever seen it.

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<v Speaker 1>Hey, Rock Chuck Jayhawk. I see you went to the

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<v Speaker 1>University of Kansas.

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<v Speaker 3>Yeah, thank you, Kanson. Even though I'm in Maryland.

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<v Speaker 1>Where in Kansas are you from? I'm a native Kansas myself.

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<v Speaker 3>Well, my dad was a newspaper editor and took us

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<v Speaker 3>to a little town on the Camp Oklahoma border called Coffeeville.

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<v Speaker 1>I know it.

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<v Speaker 2>I'm from a little town in southwest Kansas called Scott City.

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<v Speaker 1>So I'm from the middle of nowhere Kansas myself.

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<v Speaker 3>I love it.

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<v Speaker 2>So the first thing you said before we let you go,

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<v Speaker 2>and we're talking with Omark Hamrick, who is a senior

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<v Speaker 2>economic analysis with analysts with bankrate dot Com. We're not

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<v Speaker 2>going to see these kind of numbers anytime again soon.

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<v Speaker 1>Why is that.

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<v Speaker 3>Just so many things in the transom here that are

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<v Speaker 3>arguing against it, not the least of which is the

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<v Speaker 3>Federal Reserve is vowing to keep interest rates high for longer,

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<v Speaker 3>having really had an unprecedented in our lifetime tightening cycle

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<v Speaker 3>going back to March of last year. We'll have a

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<v Speaker 3>FED meeting next Wednesday. I'll be attending and we'll hear

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<v Speaker 3>from Chairman Powell at that moment about the future direction.

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<v Speaker 3>But the Fed shows no intention of reducing interest rates

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<v Speaker 3>anytime soon. Now, if there were, you know, an absolute

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<v Speaker 3>slow down in the economy, they'd be looking at that.

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<v Speaker 3>But we just had a refresher today on the Fed's

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<v Speaker 3>own preferred gauge of inflation, and that's well above their

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<v Speaker 3>target of two percent. So they may feel that they

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<v Speaker 3>can leave rates where they are, and that's still having

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<v Speaker 3>a restrictive impact on the economy. And the other part is,

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<v Speaker 3>you know, rates are sort of determined two ways. One

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<v Speaker 3>is through the Federal Reserve and other central banks and

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<v Speaker 3>the other in the financial markets. And so we look

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<v Speaker 3>at things like treasury yields, which might seem very wonky

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<v Speaker 3>and maybe irrelevant, but actually they're incredibly relevant because they

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<v Speaker 3>help to determine the ability or the willingness on the

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<v Speaker 3>part of investors to send stock prices higher. And we

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<v Speaker 3>know that stocks have been under some pressure of late

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<v Speaker 3>because of those rising yields. And those rising yields also

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<v Speaker 3>are determinedive of what happens with mortgage rates, and we

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<v Speaker 3>see mortgage rates averaging a thirty year fixed about eight

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<v Speaker 3>percent right now, which is the highest sense two thousand.

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<v Speaker 3>So the housing market looks to be sort of headed

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<v Speaker 3>for another recession like experience here, because you're talking about

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<v Speaker 3>a monthly payment on a mortgage that would be essentially

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<v Speaker 3>one thousand dollars a month more than it would have

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<v Speaker 3>been just about two plus years ago.

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<v Speaker 1>That's a stunning statistic.

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<v Speaker 3>Yeah yeah, yeah yeah. And that's a four hundred thousand dollars.

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<v Speaker 3>So in terms of you know, a lot of places

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<v Speaker 3>in the country, you'd be lucky to find a.

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<v Speaker 2>Four hundred, right like the Bay area of California. Hey,

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<v Speaker 2>we appreciate your time. Enjoyed that and from from from

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<v Speaker 2>Cannes and to kNs and thank thanks for coming on today.

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<v Speaker 1>Appreciate it my great pleasure.

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<v Speaker 3>Enjoyed a great deal and we'll look forward to connecting

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<v Speaker 3>again down the road.

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<v Speaker 1>All about you bet thanks he getting