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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus Mobile Act and on your radio.

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Speaker 1: This is a Bloomberg business flag from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Palot. Stocks continue to move lower, worst level

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Speaker 1: of the day right now on the DAL, the SMP

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Speaker 1: and NASDAK earnings continuing to set the tone on global

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Speaker 1: equity markets, stocks retreating from records. The SMP five hundred

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Speaker 1: index down eleven to sixty one to drop there of

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Speaker 1: five tenths of one percent. Nasdaq is down twenty two

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Speaker 1: points to drop of five tenths of one percent down.

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Speaker 1: Industrials down a hundred and fourteen points to drop of

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Speaker 1: six tenths of one percent. The tenure of five thirty

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Speaker 1: seconds yield there one point five six percent. Gold up

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Speaker 1: ten dollars an ounce to thirteen twenty nine, a gain

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Speaker 1: of eight tenths of one percent, and crude oil down

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Speaker 1: one nine percent, down eighty six cents forty four eighty

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Speaker 1: nine for a barrel of West Texas Intermediate crude. I'm

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Speaker 1: Charlie Palot, and that's a Bloomberg business fly. This is

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Speaker 1: taking stock with Pim Fox and Kathleen Hayes on Bloomberg Radio.

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Speaker 1: A basket of leading economic indicators rose in June, as

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Speaker 1: jobless claims fell and home builders signaled that they would

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Speaker 1: break more ground. That's the latest report to show the U.

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Speaker 1: S economy is starting the second half of the year

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Speaker 1: on more solid footing. Here to tell us more, Ken Goldstein,

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Speaker 1: he is the economist at the conference board. Can always

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Speaker 1: a pleasure. Thanks for coming in. Give us the broad

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Speaker 1: picture right now on the conference boards June Leading Economic

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Speaker 1: Index report. I keep telling you we start with the

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Speaker 1: coincident because that tells us where we are right now

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Speaker 1: in terms of production, terms of jobs, terms of incomes.

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Speaker 1: We've actually moved up a little bit in the last

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Speaker 1: month or so. And in terms of leading indicators, not

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Speaker 1: just the latest month, but even the six month change

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Speaker 1: is telling us either we stay on the course that

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Speaker 1: we're on, or if anything, actually pick up a little

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Speaker 1: bit of momentum, especially out of the housing market. So

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Speaker 1: a three tenths of a percent increased last month that

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Speaker 1: reverses May's two tents of a present decline. That was

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Speaker 1: better than economists had estimated. Yeah, I mean, if you've

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Speaker 1: average the two months, basically they haven't done much. But

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Speaker 1: here's the thing. One of the things that we're seeing

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Speaker 1: right now, and you saw this in the CBI just

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Speaker 1: last week, is that the only thing that's moving in

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Speaker 1: the CPI are rents and home mono costs because vacancy

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Speaker 1: rates for apartments are so low, and because demand for

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Speaker 1: homes is being you know, is exceeding the supply. So

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Speaker 1: these builders are out there trying to build new apartment buildings,

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Speaker 1: new homes as fast as they can, and that's giving

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Speaker 1: this economy a little bit of a spark. Well, earlier today,

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Speaker 1: the Chicago Federal Reserve said that national economic activity rose

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Speaker 1: in June at the best pace since the beginning of

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Speaker 1: the year, mainly because of improvement around the domestic manufacturing sector.

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Speaker 1: What do you make of that, Well, you know, part

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Speaker 1: of it may very well be catch up. But here's

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Speaker 1: what I find really interesting. This is not just the

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Speaker 1: US phenomenon. Brazil, um Uh, South Korea, you know, are

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Speaker 1: even Mexico are going through the same kind of thing.

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Speaker 1: So maybe there's a little bit of a momentum not

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Speaker 1: just to the domestic economy, but to the global economy

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Speaker 1: that will feed back to the domestic economy. Jovass claims

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Speaker 1: that came in today. People were not necessarily surprised, but

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Speaker 1: they were certainly feeling much more optimistic about the economy

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Speaker 1: after the initial Topics Claims report. You know, so, one

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Speaker 1: of the things that we saw in the first half

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Speaker 1: of the year is a drop down from two hundred

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Speaker 1: jobs a month to about a hundred fifty thousand. But

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Speaker 1: it's not a steady decline. It's like we moved from

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Speaker 1: a step to a step as opposed to a decline.

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Speaker 1: And if the labor market remains so strong and the

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Speaker 1: housing markets picking up momentum, that's going to feed consumer confidence.

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Speaker 1: That's going to feed consumers spending, and you're gonna see

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Speaker 1: some of that in the reports about back to school

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Speaker 1: sales this very summer. As as we speak, I'm wondering

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Speaker 1: if you could just tell us a little bit about

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Speaker 1: the index and how it was composed and what it

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Speaker 1: tells you, not necessarily about the future, but how it

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Speaker 1: describes the present for people. In other words, the components

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Speaker 1: are not all the same. Some of the measure stock prices.

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Speaker 1: This is this is a great question because the whole

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Speaker 1: point I mean, imagine you're at a doctor's office and

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Speaker 1: the doctor wants to check. So he doesn't just put

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Speaker 1: one probe, he puts them all over. Will we put

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Speaker 1: one in the housing market, the labor market, the industrial market,

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Speaker 1: and so we get a sense about what's going on

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Speaker 1: because not all pieces of the economy moving at the

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Speaker 1: same pace at the same time. What this is telling

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Speaker 1: us is that there's enough momentum in enough sector so

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Speaker 1: that overall there's not a lot, but there's a little

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Speaker 1: bit of momentum to the U. S economy. And as

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Speaker 1: they just suggested, in at least some parts of the

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Speaker 1: global economy, we're seeing the same thing. Today's existing home

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Speaker 1: sales report. Home sales are at a pace that we

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Speaker 1: have not seen in nine years. This is pent up

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Speaker 1: to man. These are all these folks, especially the young

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Speaker 1: folks who took so long to get you know, a

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Speaker 1: down payment together because you can't get a surprime mortgage anymore,

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Speaker 1: as well as the banks allowing you know, approving of

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Speaker 1: mortgage mortgages. So that's feeding this demand not only for

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Speaker 1: apartments but also for new homes. And you know, it's

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Speaker 1: gonna take a while to really scratch that itch. I

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Speaker 1: was looking at. For example, the rate on thirty year

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Speaker 1: mortgages right thirty your paper, someone is taking the other

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Speaker 1: side of that trade. I mean three three and a

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Speaker 1: quarter percent. You see that people are going to do

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Speaker 1: a lot of refinancing. I mean, now that the rates

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Speaker 1: have come down just a little bit, that would put

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Speaker 1: more money in their pockets on a monthly basis, they'll

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Speaker 1: do some. But here's you know, the fact that that

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Speaker 1: will slow that down at least a little bit is

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Speaker 1: banks don't really make that much money on that, so yes,

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Speaker 1: there will be some question is how much? But that

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Speaker 1: only feeds this overall momentum in terms of the housing market,

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Speaker 1: which along as I'm suggesting, with the labor market, is

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Speaker 1: feeding the consumer market, which is the thing that's really

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Speaker 1: been holding up the economy in the first half of

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Speaker 1: the year. That's the thing we're banking for the second

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Speaker 1: half of the year. I beg your pardon. Three point

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Speaker 1: four five percent. That's the average for US thirty year

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Speaker 1: mortgage rate. And that's actually slightly higher than it was

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Speaker 1: last month. And the last time we saw the numbers

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Speaker 1: that low might have been when Truman was president. Well well,

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Speaker 1: and the fixed year UH fixed year, the fifteen year

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Speaker 1: fixed rate mortgage two point seven five. It's amazing. Well if,

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Speaker 1: of course, as that happens, so that the affordability of

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Speaker 1: a new house, you know, pushing some of these folks

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Speaker 1: who got pushed into the rental market, it's pushing them

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Speaker 1: back into the home owner market. As far as those

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Speaker 1: mortgage rates go, though, do you feel that they are

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Speaker 1: readily accessible to the people that want to buy homes,

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Speaker 1: you know, to some who want to buy homes, to

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Speaker 1: those who have a down payment you know, and have

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Speaker 1: the kind of income, uh, you know, to be able

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Speaker 1: to sustain that. So what we will absolutely not do

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Speaker 1: is go back to a period of time that we

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Speaker 1: have befood the debacle when you had people who were

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Speaker 1: paying half of their income to make a teaser rig.

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Speaker 1: Those days are long gone and they're not coming back.

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Speaker 1: What about the people who are on the other side

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Speaker 1: of the trade taking thirty year paper for three three

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Speaker 1: and a half pers This is a whole other question

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Speaker 1: about how low interest rates are and that they're not

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Speaker 1: fully priced in risk, and what's going to be the

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Speaker 1: penalty for that, and when is that going to start

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Speaker 1: to hit? Not now, but that's the day that's coming. Well,

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Speaker 1: we look forward to having you on that as always

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Speaker 1: Ken Goldstein. He is economist with the Conference Board and

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Speaker 1: giving us details about the conference boards leading Economic Index

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Speaker 1: up three tenths of our percent for the month of June.

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Speaker 1: I'm Pim Fox and this is Bloomberg. Coming up on

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Speaker 1: taking Stock. We're going to talk about a company who's

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Speaker 1: closing a twenty two million dollar funding round and how

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Speaker 1: they're trying to redefine companies such as ge, Microsoft, and

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Speaker 1: Fiser to find talented workers. That's next