WEBVTT - Conference Board's Goldstein on the June LEI Index (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg business flag from Bloomberg World Handquarters.

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

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<v Speaker 1>of the day right now on the DAL, the SMP

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<v Speaker 1>and NASDAK earnings continuing to set the tone on global

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<v Speaker 1>equity markets, stocks retreating from records. The SMP five hundred

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<v Speaker 1>index down eleven to sixty one to drop there of

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<v Speaker 1>five tenths of one percent. Nasdaq is down twenty two

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<v Speaker 1>points to drop of five tenths of one percent down.

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<v Speaker 1>Industrials down a hundred and fourteen points to drop of

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<v Speaker 1>six tenths of one percent. The tenure of five thirty

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<v Speaker 1>seconds yield there one point five six percent. Gold up

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<v Speaker 1>ten dollars an ounce to thirteen twenty nine, a gain

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<v Speaker 1>of eight tenths of one percent, and crude oil down

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<v Speaker 1>one nine percent, down eighty six cents forty four eighty

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<v Speaker 1>nine for a barrel of West Texas Intermediate crude. I'm

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

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<v Speaker 1>taking stock with Pim Fox and Kathleen Hayes on Bloomberg Radio.

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<v Speaker 1>A basket of leading economic indicators rose in June, as

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<v Speaker 1>jobless claims fell and home builders signaled that they would

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<v Speaker 1>break more ground. That's the latest report to show the U.

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<v Speaker 1>S economy is starting the second half of the year

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<v Speaker 1>on more solid footing. Here to tell us more, Ken Goldstein,

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<v Speaker 1>he is the economist at the conference board. Can always

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<v Speaker 1>a pleasure. Thanks for coming in. Give us the broad

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<v Speaker 1>picture right now on the conference boards June Leading Economic

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<v Speaker 1>Index report. I keep telling you we start with the

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<v Speaker 1>coincident because that tells us where we are right now

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<v Speaker 1>in terms of production, terms of jobs, terms of incomes.

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<v Speaker 1>We've actually moved up a little bit in the last

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<v Speaker 1>month or so. And in terms of leading indicators, not

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<v Speaker 1>just the latest month, but even the six month change

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<v Speaker 1>is telling us either we stay on the course that

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<v Speaker 1>we're on, or if anything, actually pick up a little

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<v Speaker 1>bit of momentum, especially out of the housing market. So

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<v Speaker 1>a three tenths of a percent increased last month that

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<v Speaker 1>reverses May's two tents of a present decline. That was

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

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

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<v Speaker 1>here's the thing. One of the things that we're seeing

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<v Speaker 1>right now, and you saw this in the CBI just

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<v Speaker 1>last week, is that the only thing that's moving in

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<v Speaker 1>the CPI are rents and home mono costs because vacancy

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<v Speaker 1>rates for apartments are so low, and because demand for

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<v Speaker 1>homes is being you know, is exceeding the supply. So

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<v Speaker 1>these builders are out there trying to build new apartment buildings,

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<v Speaker 1>new homes as fast as they can, and that's giving

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<v Speaker 1>this economy a little bit of a spark. Well, earlier today,

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<v Speaker 1>the Chicago Federal Reserve said that national economic activity rose

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<v Speaker 1>in June at the best pace since the beginning of

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<v Speaker 1>the year, mainly because of improvement around the domestic manufacturing sector.

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<v Speaker 1>What do you make of that, Well, you know, part

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<v Speaker 1>of it may very well be catch up. But here's

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<v Speaker 1>what I find really interesting. This is not just the

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<v Speaker 1>US phenomenon. Brazil, um Uh, South Korea, you know, are

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<v Speaker 1>even Mexico are going through the same kind of thing.

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<v Speaker 1>So maybe there's a little bit of a momentum not

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<v Speaker 1>just to the domestic economy, but to the global economy

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<v Speaker 1>that will feed back to the domestic economy. Jovass claims

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<v Speaker 1>that came in today. People were not necessarily surprised, but

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<v Speaker 1>they were certainly feeling much more optimistic about the economy

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<v Speaker 1>after the initial Topics Claims report. You know, so, one

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<v Speaker 1>of the things that we saw in the first half

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<v Speaker 1>of the year is a drop down from two hundred

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<v Speaker 1>jobs a month to about a hundred fifty thousand. But

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<v Speaker 1>it's not a steady decline. It's like we moved from

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<v Speaker 1>a step to a step as opposed to a decline.

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<v Speaker 1>And if the labor market remains so strong and the

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

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

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<v Speaker 1>some of that in the reports about back to school

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

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<v Speaker 1>if you could just tell us a little bit about

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<v Speaker 1>the index and how it was composed and what it

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<v Speaker 1>tells you, not necessarily about the future, but how it

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<v Speaker 1>describes the present for people. In other words, the components

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<v Speaker 1>are not all the same. Some of the measure stock prices.

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<v Speaker 1>This is this is a great question because the whole

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

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<v Speaker 1>the doctor wants to check. So he doesn't just put

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<v Speaker 1>one probe, he puts them all over. Will we put

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<v Speaker 1>one in the housing market, the labor market, the industrial market,

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<v Speaker 1>and so we get a sense about what's going on

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<v Speaker 1>because not all pieces of the economy moving at the

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<v Speaker 1>same pace at the same time. What this is telling

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<v Speaker 1>us is that there's enough momentum in enough sector so

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<v Speaker 1>that overall there's not a lot, but there's a little

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<v Speaker 1>bit of momentum to the U. S economy. And as

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<v Speaker 1>they just suggested, in at least some parts of the

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

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<v Speaker 1>sales report. Home sales are at a pace that we

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<v Speaker 1>have not seen in nine years. This is pent up

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<v Speaker 1>to man. These are all these folks, especially the young

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<v Speaker 1>folks who took so long to get you know, a

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

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<v Speaker 1>as well as the banks allowing you know, approving of

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<v Speaker 1>mortgage mortgages. So that's feeding this demand not only for

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

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<v Speaker 1>gonna take a while to really scratch that itch. I

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<v Speaker 1>was looking at. For example, the rate on thirty year

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<v Speaker 1>mortgages right thirty your paper, someone is taking the other

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<v Speaker 1>side of that trade. I mean three three and a

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<v Speaker 1>quarter percent. You see that people are going to do

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<v Speaker 1>a lot of refinancing. I mean, now that the rates

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<v Speaker 1>have come down just a little bit, that would put

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<v Speaker 1>more money in their pockets on a monthly basis, they'll

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<v Speaker 1>do some. But here's you know, the fact that that

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<v Speaker 1>will slow that down at least a little bit is

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<v Speaker 1>banks don't really make that much money on that, so yes,

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<v Speaker 1>there will be some question is how much? But that

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<v Speaker 1>only feeds this overall momentum in terms of the housing market,

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<v Speaker 1>which along as I'm suggesting, with the labor market, is

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<v Speaker 1>feeding the consumer market, which is the thing that's really

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<v Speaker 1>been holding up the economy in the first half of

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<v Speaker 1>the year. That's the thing we're banking for the second

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<v Speaker 1>half of the year. I beg your pardon. Three point

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<v Speaker 1>four five percent. That's the average for US thirty year

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<v Speaker 1>mortgage rate. And that's actually slightly higher than it was

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<v Speaker 1>last month. And the last time we saw the numbers

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<v Speaker 1>that low might have been when Truman was president. Well well,

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<v Speaker 1>and the fixed year UH fixed year, the fifteen year

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

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<v Speaker 1>of course, as that happens, so that the affordability of

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<v Speaker 1>a new house, you know, pushing some of these folks

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<v Speaker 1>who got pushed into the rental market, it's pushing them

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<v Speaker 1>back into the home owner market. As far as those

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<v Speaker 1>mortgage rates go, though, do you feel that they are

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<v Speaker 1>readily accessible to the people that want to buy homes,

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<v Speaker 1>you know, to some who want to buy homes, to

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<v Speaker 1>those who have a down payment you know, and have

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<v Speaker 1>the kind of income, uh, you know, to be able

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<v Speaker 1>to sustain that. So what we will absolutely not do

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<v Speaker 1>is go back to a period of time that we

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<v Speaker 1>have befood the debacle when you had people who were

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<v Speaker 1>paying half of their income to make a teaser rig.

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<v Speaker 1>Those days are long gone and they're not coming back.

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<v Speaker 1>What about the people who are on the other side

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<v Speaker 1>of the trade taking thirty year paper for three three

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<v Speaker 1>and a half pers This is a whole other question

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<v Speaker 1>about how low interest rates are and that they're not

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<v Speaker 1>fully priced in risk, and what's going to be the

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<v Speaker 1>penalty for that, and when is that going to start

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

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<v Speaker 1>we look forward to having you on that as always

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<v Speaker 1>Ken Goldstein. He is economist with the Conference Board and

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<v Speaker 1>giving us details about the conference boards leading Economic Index

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<v Speaker 1>up three tenths of our percent for the month of June.

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<v Speaker 1>I'm Pim Fox and this is Bloomberg. Coming up on

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

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<v Speaker 1>closing a twenty two million dollar funding round and how

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<v Speaker 1>they're trying to redefine companies such as ge, Microsoft, and

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<v Speaker 1>Fiser to find talented workers. That's next