Speaker 1: Good news in the US economy.
Speaker 2: It grew by an annual rate of nearly five percent
Speaker 2: in the third quarter, beating expectations.
Speaker 1: Well, that's a short clip.
Speaker 2: Five percent is a high number, and that's why we
Speaker 2: need to talk to a senior economic analyst, not a
Speaker 2: junior economconomic analyst who wouldn't know a prime interest rate
Speaker 2: if we walked in the room and slapped him in
Speaker 2: the face. We're talking a senior economic analysts like Mark
Speaker 2: Hamrick with who is the Washington Borough chief with bankrate
Speaker 2: dot com. Mark, Welcome to the Armstrong in Getty Shaw.
Speaker 1: Are you good to be with you, gentlemen?
Speaker 3: Thanks for having me.
Speaker 1: What are you dressing as for Halloween?
Speaker 3: Oh? I can just go as myself. That scares plenty
Speaker 3: of upol and it really saves money.
Speaker 1: Right, So five percent quarterly growth is huge, isn't it?
Speaker 3: For sure? This is annualized, So what we do is
Speaker 3: take the number and multiply it by four to get
Speaker 3: what it would be for the full year. But you know,
Speaker 3: the long term trend is about one point eight or
Speaker 3: two percent, So we were twice the growth rate of
Speaker 3: the previous quarter and above the long term trend. But
Speaker 3: you know, as I wrote in the note that I
Speaker 3: shared with our friends sort of across the spectrum and
Speaker 3: then LinkedIn and elsewhere, take a good look at that,
Speaker 3: because you won't be seeing a number that high again
Speaker 3: for a good while more likely.
Speaker 2: Okay, so why is that? And I know the whole
Speaker 2: raisin interest rates thing. The point to that is to
Speaker 2: slow down the economy, to try to you know, stop inflation.
Speaker 2: And then we're growing this fast. So yeah, what's going
Speaker 2: on there?
Speaker 3: Sure? Well, first of all, let's acknowledge and if we're
Speaker 3: in a mood to celebrate the fact the economy has
Speaker 3: proven more resilient and ultimately robust than most of would
Speaker 3: have given that credit. And in our quarterly economy surveys
Speaker 3: that we've been doing for many years, we go back
Speaker 3: to the first quarter of last year twenty twenty two,
Speaker 3: when they were starting to say collectively that the risk
Speaker 3: of imminent recession we're elevated. And here we are in
Speaker 3: the fourth quarter of twenty three and we don't have
Speaker 3: a recession that is quantifiable occurring right now. So a
Speaker 3: lot of things have been done to sort of get
Speaker 3: us where we are, and there are a lot of
Speaker 3: things being done to sort of unwind the parts of
Speaker 3: that that can be unwound. As you know, there was
Speaker 3: a lot of fiscal stimulus put into the system by
Speaker 3: two congresses and two presidents in response to the pandemic.
Speaker 3: We had interest rates at record low levels, not only
Speaker 3: during the pandemic but for the broader part of the
Speaker 3: previous fifteen years, sort of barely deviating from that in
Speaker 3: between the pandemic and the Great Financial Crisis. And there
Speaker 3: is some long term federal spending related to infrastructure, etc.
Speaker 3: That are not making a huge difference, but do make
Speaker 3: a difference on the margin. The other part is that
Speaker 3: consumers really did accumulate more savings than they would have
Speaker 3: had a tendency to do during the pandemic. Part of
Speaker 3: that was forced, part of that was physical assistance in
Speaker 3: the form of things like the child tax credit. And
Speaker 3: as we've seen, there has been some component of revenge spending,
Speaker 3: as witnessed by the would be fistfights that are occurring
Speaker 3: on airlines at an airport, so.
Speaker 1: All revenge spending.
Speaker 2: So a lot of economics is you know, you're an
Speaker 2: expert on this, but is you know, pretty hard numbers,
Speaker 2: nuts and bolts, you get them. This many bushels of
Speaker 2: corner this many, you know whatever, But a lot of
Speaker 2: it is an emotion, especially when you get to the
Speaker 2: consumer spending, which is two thirds of our economy. That's
Speaker 2: just a motion, and so you think we had money
Speaker 2: burning a hole in our pocket. My concern is what
Speaker 2: the way these numbers don't fit together. Of course, on
Speaker 2: the consumer spending is I'm not feeling wealthy, and nobody
Speaker 2: I know is. And every time you go to the
Speaker 2: grocery store, or go through a drive through at McDonald's,
Speaker 2: or get gas or whatever, you're shocked by the price.
Speaker 2: Yet we continue to spend. What's the psychology going on there?
Speaker 3: Sure well you weren't alone in any of those places,
Speaker 3: I'm guessing, so you have plenty of company. That's one thing.
Speaker 3: The other part is inflation elevates the dollar adjusted or
Speaker 3: measured amounts of spending just a loan. So if we
Speaker 3: have inflation that's close to a four percent annual increase,
Speaker 3: that helps to get you some of the increase. But
Speaker 3: the pointing has been up on an inflation adjusted basis
Speaker 3: as well. So what I would say is, and I
Speaker 3: think that's a very good point you're making that you
Speaker 3: know we are not all go sort of an ancient
Speaker 3: cultural reference or pop culture reference here. We're not all
Speaker 3: mister Spock, right, We're not all acting only with logic
Speaker 3: and so, and you know, the experts in psychology would
Speaker 3: tell us that most of the decisions we make are
Speaker 3: actually sort of emotionally based and not sort of you know,
Speaker 3: using the avacus to figure it out. So I do
Speaker 3: think that there's a big part of that absolutely, and
Speaker 3: it's not sustainable at its current pace. I think that's
Speaker 3: the most important part of it.
Speaker 2: Well, and in the economy, can't count on a Taylor
Speaker 2: Swift concert every summer.
Speaker 3: Either, That's right. Absolutely.
Speaker 2: I'm a out of concern is with the consumer spending
Speaker 2: because I just had this thing in front of me,
Speaker 2: the number of people, it's a high number of people
Speaker 2: that are dipping into their four to one k's for
Speaker 2: emergency spending or putting it on credit cards. How much
Speaker 2: of the consumer spending is stuff we really shouldn't be spending.
Speaker 3: Well, what I would I would sort of reverse engineer
Speaker 3: that and say that, you know, we survey on these
Speaker 3: sorts of issues at bank rate over the years all
Speaker 3: the time, and the reality is that most Americans are
Speaker 3: living paycheck to paycheck, if they were not spending on
Speaker 3: all those things and they had some cushion and their finances,
Speaker 3: which you believe a good number of people do, they
Speaker 3: could be channeling that money to not only emergency savings,
Speaker 3: but two retirement savings. And one of the more recent
Speaker 3: surveys we did indicated that the majority of Americans feel
Speaker 3: that they are behind on their retirement savings and perhaps
Speaker 3: no surprise, those who are more senior ie realizing they
Speaker 3: might actually get to a retirement phase or the risk
Speaker 3: is there, are feeling that more acutely. So what you know,
Speaker 3: the other part is, you know, we've been talking lately
Speaker 3: and I don't know if you guys have heard this phrase,
Speaker 3: but it's come up in some of the discussions that
Speaker 3: people have sort of come to us about. And we'll
Speaker 3: see whether it has any stickiness or residence. And that
Speaker 3: is a concept that's being referred to as soft saving
Speaker 3: or savings, and this is an idea that it's being
Speaker 3: associated with sort of the youngest cohort er age group
Speaker 3: that sort of adults and that is eighteen to twenty
Speaker 3: six gen z. And what they're sort of being associated
Speaker 3: with is an idea that essentially, you should try to
Speaker 3: live for today and not think the career is the
Speaker 3: be all end all.
Speaker 1: Yeah, thanks thanks hire late News.
Speaker 2: Yeah, well, I think there are ancient fables about that
Speaker 2: attitude and how well it works out.
Speaker 3: Well. I mean, you know, ballance is important, right, and
Speaker 3: I think many of us were reminded about the importance
Speaker 3: of that when we were sort of grappling with life
Speaker 3: death issues during the pandemic. And it's also relevant in
Speaker 3: the discussion of people demanding more from their employers. That
Speaker 3: isn't just about compensation. That it's about, you know, can
Speaker 3: there be some flexibility if that kind of work allows it,
Speaker 3: and you know, four day work weeks and remote work,
Speaker 3: hybrid work. But you know what I would say is
Speaker 3: that to bring it back around to the GDP question,
Speaker 3: we are fortunate that we're still looking at at unemployment
Speaker 3: rate of three point eight percent, and we'll get an
Speaker 3: update on this next Friday. That is remarkably close to
Speaker 3: the historical low three point four percent we had in April,
Speaker 3: that was a fifty three year low. People can logically
Speaker 3: or appropriately debate, you know, the quality of all those
Speaker 3: jobs and the statistics that also point out that there
Speaker 3: are millions of Americans working part time that would like
Speaker 3: to have full time work, millions of Americans who would
Speaker 3: like to have a job but are not looking for one.
Speaker 3: Those are you know, those are issues that are worthy
Speaker 3: of consideration as well. But the reality is the unemployment
Speaker 3: rate is low. We are not in a recession as
Speaker 3: it's as it's defined by those who define such things.
Speaker 3: But that doesn't mean that just because the sun is
Speaker 3: shining today that there won't be rain on down the road,
Speaker 3: and so we should be trying to prioritize our emergency
Speaker 3: savings paying down debt when credit card debt is at
Speaker 3: the highest level we've ever seen it.
Speaker 1: Hey, Rock Chuck Jayhawk. I see you went to the
Speaker 1: University of Kansas.
Speaker 3: Yeah, thank you, Kanson. Even though I'm in Maryland.
Speaker 1: Where in Kansas are you from? I'm a native Kansas myself.
Speaker 3: Well, my dad was a newspaper editor and took us
Speaker 3: to a little town on the Camp Oklahoma border called Coffeeville.
Speaker 1: I know it.
Speaker 2: I'm from a little town in southwest Kansas called Scott City.
Speaker 1: So I'm from the middle of nowhere Kansas myself.
Speaker 3: I love it.
Speaker 2: So the first thing you said before we let you go,
Speaker 2: and we're talking with Omark Hamrick, who is a senior
Speaker 2: economic analysis with analysts with bankrate dot Com. We're not
Speaker 2: going to see these kind of numbers anytime again soon.
Speaker 1: Why is that.
Speaker 3: Just so many things in the transom here that are
Speaker 3: arguing against it, not the least of which is the
Speaker 3: Federal Reserve is vowing to keep interest rates high for longer,
Speaker 3: having really had an unprecedented in our lifetime tightening cycle
Speaker 3: going back to March of last year. We'll have a
Speaker 3: FED meeting next Wednesday. I'll be attending and we'll hear
Speaker 3: from Chairman Powell at that moment about the future direction.
Speaker 3: But the Fed shows no intention of reducing interest rates
Speaker 3: anytime soon. Now, if there were, you know, an absolute
Speaker 3: slow down in the economy, they'd be looking at that.
Speaker 3: But we just had a refresher today on the Fed's
Speaker 3: own preferred gauge of inflation, and that's well above their
Speaker 3: target of two percent. So they may feel that they
Speaker 3: can leave rates where they are, and that's still having
Speaker 3: a restrictive impact on the economy. And the other part is,
Speaker 3: you know, rates are sort of determined two ways. One
Speaker 3: is through the Federal Reserve and other central banks and
Speaker 3: the other in the financial markets. And so we look
Speaker 3: at things like treasury yields, which might seem very wonky
Speaker 3: and maybe irrelevant, but actually they're incredibly relevant because they
Speaker 3: help to determine the ability or the willingness on the
Speaker 3: part of investors to send stock prices higher. And we
Speaker 3: know that stocks have been under some pressure of late
Speaker 3: because of those rising yields. And those rising yields also
Speaker 3: are determinedive of what happens with mortgage rates, and we
Speaker 3: see mortgage rates averaging a thirty year fixed about eight
Speaker 3: percent right now, which is the highest sense two thousand.
Speaker 3: So the housing market looks to be sort of headed
Speaker 3: for another recession like experience here, because you're talking about
Speaker 3: a monthly payment on a mortgage that would be essentially
Speaker 3: one thousand dollars a month more than it would have
Speaker 3: been just about two plus years ago.
Speaker 1: That's a stunning statistic.
Speaker 3: Yeah yeah, yeah yeah. And that's a four hundred thousand dollars.
Speaker 3: So in terms of you know, a lot of places
Speaker 3: in the country, you'd be lucky to find a.
Speaker 2: Four hundred, right like the Bay area of California. Hey,
Speaker 2: we appreciate your time. Enjoyed that and from from from
Speaker 2: Cannes and to kNs and thank thanks for coming on today.
Speaker 1: Appreciate it my great pleasure.
Speaker 3: Enjoyed a great deal and we'll look forward to connecting
Speaker 3: again down the road.
Speaker 1: All about you bet thanks he getting