Speaker 1: We'd like to welcome to the Armstrong and Getty Show
Speaker 1: Mark Hamrick, Washington Bureau Chief, Senior Economic analyst with bankrate
Speaker 1: dot Com, to talk about a couple of different things
Speaker 1: on economics.
Speaker 2: Hey, welcome to the show. Appreciate it.
Speaker 3: Good to be with you, Jack.
Speaker 1: Thank you said, I don't know where to start. What's
Speaker 1: on your radar? Like, what do you what do you
Speaker 1: headed into twenty four? What do you think is the
Speaker 1: biggest thing going out there? Inflation, the mortgage situation, consumer spending,
Speaker 1: What's what's what's the what's what's your headline?
Speaker 3: Well aside from Santaana's reindeer on the radar In terms
Speaker 3: of economic issues, obviously inflation is the number one issue
Speaker 3: for let's say twenty twenty three, but there have been
Speaker 3: sort of bluer skies here, which has been represented in
Speaker 3: improving consumer sentiment numbers. Consumer spending has been a little
Speaker 3: better than expected. The stock market at record highs for
Speaker 3: the blue chip averages. We're seeing gasoline prices down at
Speaker 3: the lowest levels in about two years. So it's been
Speaker 3: a pretty grim period over the course of the pandemic,
Speaker 3: to say the very least. Sure, we've had a lot
Speaker 3: of volatility and surprises. But I think the prospects are
Speaker 3: looking better as we prepare to end the year.
Speaker 1: I'm a little well, I don't know if I'm concerned
Speaker 1: or not, because I'm not. Consumer spending isn't always a
Speaker 1: good thing. If spending, if people are spending money they
Speaker 1: don't have and racking up credit card bills, that's not
Speaker 1: necessarily good for the economy. But we had that giant
Speaker 1: quarter over the summer where consumer spending was much stronger
Speaker 1: than we were expecting. It'll be interesting to see coming
Speaker 1: out of this holiday season if people were still feeling
Speaker 1: so flush or not.
Speaker 3: Ultimately, the question is can the consumer of sort of
Speaker 3: resilience be sustained? And I think your point's well taken.
Speaker 3: And you know, the average for the best qualified barrower's
Speaker 3: getting offers from credit card companies is now twenty one percent.
Speaker 3: That's a very steep price to pay if you're among
Speaker 3: those who are racking up a trillion dollars in credit
Speaker 3: card debt, and the store card charges are on average
Speaker 3: closer to twenty nine percent.
Speaker 2: Wow, good god.
Speaker 3: Yeah yeah yeah, So obviously very costly and to be avoided,
Speaker 3: which is why you know, more often than not you're
Speaker 3: you know, using your own card at checkout in many
Speaker 3: of these change stores, and the question they ask you
Speaker 3: first is not whether you're having a good day, but
Speaker 3: would you like to sign up for their sports card?
Speaker 3: You know so. But the main thing right now is
Speaker 3: unemployments of three point seven percent. That's remarkable. Virtually nobody
Speaker 3: had that on their forecast to be ending up the year.
Speaker 3: And the Federal Reserve not only has avoided raising interest
Speaker 3: rates at the last three meetings, it's now forecasting that
Speaker 3: it could be cutting rates three times by one quarter
Speaker 3: one percent next year, which by the way, would be
Speaker 3: reflected with lower credit card interest rates. But you know,
Speaker 3: if you're accumulating a lot of debt, you know you're
Speaker 3: getting behind the eight all on that.
Speaker 1: I feel like I've seen a couple of people in
Speaker 1: recent days and I realized these sorts of headlines get
Speaker 1: lots of clicks, which might be why people seem but
Speaker 1: a couple of different people saying there's a major real
Speaker 1: estate correction coming going to be historic. But things are
Speaker 1: really really weird because so many people are locked into
Speaker 1: these you know, two point nine percent loans. You're not
Speaker 1: going to move unless you absolutely have to interest rates
Speaker 1: being where they are now, prices are at least around
Speaker 1: where I live, ridiculously, I still what do you think.
Speaker 3: I don't look for anything like that. With a residential
Speaker 3: housing market, the concern is really about office commercial real estate,
Speaker 3: and we're seeing that in process, and you know that
Speaker 3: has implications for the financial system and banks and the
Speaker 3: owners of those properties. But in terms of residential real estate,
Speaker 3: we couldn't be farther from the conditions that led to
Speaker 3: the Great Financial Crisis and the housing bubble in the
Speaker 3: mid early two thousands, because it was at that point
Speaker 3: where there was a lot of fraud going on with
Speaker 3: respect to mortgage applications and processing. It was too easy
Speaker 3: to get a mortgage, there wasn't sufficient documentation, and we
Speaker 3: really did have kind of a violent regulatory reaction to
Speaker 3: that in a sense of overhauling the system. So that's
Speaker 3: not my concern at all. We have too little inventory,
Speaker 3: to your point, which is why home prices have remained
Speaker 3: resilient and are still up four percent year every year.
Speaker 3: With existing home sales and the number we got today.
Speaker 2: Do you expect several rate cuts next year?
Speaker 3: That's the base case at this point. What we require
Speaker 3: for that is, for let's say, if we only get
Speaker 3: three rate cuts of one quarter one percent, that requires
Speaker 3: the economy to remain sort of continuing to grow, if
Speaker 3: not at the average rate, close to average, meaning we
Speaker 3: avoid an actual economic contraction, and that requires further progress
Speaker 3: with inflation, with the headline number on the consumer price
Speaker 3: index rising about three percent year over year. But I
Speaker 3: will say this Jacket, I think this is probably among
Speaker 3: the most important observations that I can make about the
Speaker 3: current state of the economy. And it's taken me a
Speaker 3: long time to get to this point, not only in
Speaker 3: the show, but over the course of the process. And
Speaker 3: that is that there is some disconnect between what people
Speaker 3: see in the economic headlines where that where you know,
Speaker 3: there's sort of this take that the economy is quote
Speaker 3: unquote good and what people have experienced riving aside the
Speaker 3: recent developments. And the reason for that is that retail
Speaker 3: prices are essentially up nineteen percent compared to pre pandemic level.
Speaker 3: So you get somebody coming to you and saying we
Speaker 3: need to essentially erase one fifth of your spending resource
Speaker 3: ability to spend, you'd say, well, that's among the worst
Speaker 3: things that could possibly happen to me, and that's been
Speaker 3: the experience, which obviously does most adversely affect those with
Speaker 3: lower and middle incomes as well.
Speaker 1: Yeah, I feel like a lot of people reporting on
Speaker 1: economics don't understand that the fact that the rate of
Speaker 1: inflation has gone down.
Speaker 2: Doesn't mean the prices have.
Speaker 1: Gone down or back to where they were before, because
Speaker 1: that's what people feel.
Speaker 2: And I actually think a lot of people don't understand that.
Speaker 3: I agree, which is why we're trying to talk about
Speaker 3: it more to try to sort of bridge that divide
Speaker 3: of understanding and sentiment. And ultimately it's about empathy, right,
Speaker 3: In other words, you can't just keep whistling in the
Speaker 3: wind and not acknowledge the wind. And so I want
Speaker 3: to point out if people are so inclined. My colleague
Speaker 3: Sarah Foster a Bank, has written a tremendous piece in
Speaker 3: the last couple of weeks which gets to the notion
Speaker 3: of what some particularly and social media, and there I
Speaker 3: say TikTok, referring to as either the quiet recession and
Speaker 3: the silent recession, and that is what people are experiencing,
Speaker 3: is this loss of purchasing power versus the technical definition
Speaker 3: of a recession which has not been met, but doesn't
Speaker 3: make those people feel any better. Or maybe I just
Speaker 3: say all of us feel any better about the diminution
Speaker 3: of purchasing power.
Speaker 1: Yeah, and obviously emotionally, if you're feeling something and somebody
Speaker 1: tells you know you're not, it makes you angry.
Speaker 2: And when I fully understand, because we talk about this
Speaker 2: all the time.
Speaker 1: That the rate of inflation is what a third a
Speaker 1: fourth where it was, it it's worse. But if I
Speaker 1: take my two kids to Kentucky Fried Chicken and I
Speaker 1: spend sixty bucks for the three of us, I still.
Speaker 2: Go, oh my god, I can't believe I spent sixty
Speaker 2: bucks at Kentucky Fried Chicken.
Speaker 3: Yeah, imagine how the chicken fell.
Speaker 2: Exactly.
Speaker 3: It's like I'm not even the middle man, but no,
Speaker 3: I mean absolutely, And we've all had that experience where
Speaker 3: you go, maybe it's a sandwich shop or even to
Speaker 3: get a salad, and you get out of there and
Speaker 3: and you're like, wow, how did that cost twenty twenty
Speaker 3: five bucks?
Speaker 1: For sure, how long do you think it takes for
Speaker 1: people to get used to where prices are? So even
Speaker 1: if we got back to two percent inflation, you know
Speaker 1: the target it's going to take a while before I'm
Speaker 1: not shocked by the prices of things. And I was
Speaker 1: not an adult back in the late seventies early eighties
Speaker 1: the last time we did this. How long does it
Speaker 1: take people to get used to new prices as a
Speaker 1: set point, I.
Speaker 3: Don't know that everyone will get used to that, but
Speaker 3: over time, barring any you know, sort of catastrophic economic
Speaker 3: developments that will include the likes of hyper inflation or
Speaker 3: you know, an economic contraction that really does send a
Speaker 3: lot of people to the virtual and employment lines, it's
Speaker 3: just going to take, you know, a process, and it's
Speaker 3: going to be different for everybody, depending on their financial capability.
Speaker 3: For people who have you know, well above let's say
Speaker 3: the average household income you know, to them is largely academic, right,
Speaker 3: But to I would just say, you know, the typical household.
Speaker 3: I think it's going to take some time. And what
Speaker 3: is helping with this at the moment, just in terms
Speaker 3: of real time data, is that wage growth is now
Speaker 3: outpacing the recent or current inflation rate. So that means
Speaker 3: sort of only with respect to real time you are
Speaker 3: doing better. But that's also like, well, you got rid
Speaker 3: of your fever at the moment, but you also, you know,
Speaker 3: still have some residual effects from the illness that you
Speaker 3: are recently suffering.
Speaker 2: You personally, are you done with your Christmas shopping?
Speaker 3: Great question that gets to a very controversial subject here
Speaker 3: in the hammer ulsehold, which is I, at thirty plus
Speaker 3: years of marriage, I still don't seem to do a
Speaker 3: great job purchasing from my wife. But I think that meaning,
Speaker 3: you know, there's a disconnect between my comprehension and other things.
Speaker 3: But in terms of the purchasing process, the answer, yes,
Speaker 3: we have, we have reached that sought after finish line.
Speaker 2: Fantastic.
Speaker 1: Mark Hamrick, Washington Bureau Chief, Senior Economic Analyst, bankrate dot Com.
Speaker 2: Thanks for your time today, appreciate it, my.
Speaker 3: Pleasure, Happy holidays. Happy to do your dollar there, Jack, thank.
Speaker 2: You, thank you, and you two. Also. I love the
Speaker 2: fact that he kept up.
Speaker 1: His his you know, uh, straight economic delivery through his
Speaker 1: answer about the Christmas gifts.
Speaker 2: Uh.
Speaker 1: The process for buying the presidents has not met with
Speaker 1: the expectations