WEBVTT - Economy Reports VS How People Feel: Mark Hamrick Talks To A&G

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<v Speaker 1>We'd like to welcome to the Armstrong and Getty Show

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<v Speaker 1>Mark Hamrick, Washington Bureau Chief, Senior Economic analyst with bankrate

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<v Speaker 1>dot Com, to talk about a couple of different things

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<v Speaker 1>on economics.

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<v Speaker 2>Hey, welcome to the show. Appreciate it.

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<v Speaker 3>Good to be with you, Jack.

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<v Speaker 1>Thank you said, I don't know where to start. What's

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<v Speaker 1>on your radar? Like, what do you what do you

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<v Speaker 1>headed into twenty four? What do you think is the

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<v Speaker 1>biggest thing going out there? Inflation, the mortgage situation, consumer spending,

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<v Speaker 1>What's what's what's the what's what's your headline?

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<v Speaker 3>Well aside from Santaana's reindeer on the radar In terms

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<v Speaker 3>of economic issues, obviously inflation is the number one issue

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<v Speaker 3>for let's say twenty twenty three, but there have been

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<v Speaker 3>sort of bluer skies here, which has been represented in

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<v Speaker 3>improving consumer sentiment numbers. Consumer spending has been a little

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<v Speaker 3>better than expected. The stock market at record highs for

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<v Speaker 3>the blue chip averages. We're seeing gasoline prices down at

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<v Speaker 3>the lowest levels in about two years. So it's been

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<v Speaker 3>a pretty grim period over the course of the pandemic,

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<v Speaker 3>to say the very least. Sure, we've had a lot

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<v Speaker 3>of volatility and surprises. But I think the prospects are

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<v Speaker 3>looking better as we prepare to end the year.

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<v Speaker 1>I'm a little well, I don't know if I'm concerned

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<v Speaker 1>or not, because I'm not. Consumer spending isn't always a

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<v Speaker 1>good thing. If spending, if people are spending money they

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<v Speaker 1>don't have and racking up credit card bills, that's not

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<v Speaker 1>necessarily good for the economy. But we had that giant

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<v Speaker 1>quarter over the summer where consumer spending was much stronger

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<v Speaker 1>than we were expecting. It'll be interesting to see coming

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<v Speaker 1>out of this holiday season if people were still feeling

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<v Speaker 1>so flush or not.

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<v Speaker 3>Ultimately, the question is can the consumer of sort of

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<v Speaker 3>resilience be sustained? And I think your point's well taken.

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<v Speaker 3>And you know, the average for the best qualified barrower's

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<v Speaker 3>getting offers from credit card companies is now twenty one percent.

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<v Speaker 3>That's a very steep price to pay if you're among

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<v Speaker 3>those who are racking up a trillion dollars in credit

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<v Speaker 3>card debt, and the store card charges are on average

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<v Speaker 3>closer to twenty nine percent.

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<v Speaker 2>Wow, good god.

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<v Speaker 3>Yeah yeah yeah, So obviously very costly and to be avoided,

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<v Speaker 3>which is why you know, more often than not you're

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<v Speaker 3>you know, using your own card at checkout in many

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<v Speaker 3>of these change stores, and the question they ask you

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<v Speaker 3>first is not whether you're having a good day, but

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<v Speaker 3>would you like to sign up for their sports card?

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<v Speaker 3>You know so. But the main thing right now is

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<v Speaker 3>unemployments of three point seven percent. That's remarkable. Virtually nobody

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<v Speaker 3>had that on their forecast to be ending up the year.

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<v Speaker 3>And the Federal Reserve not only has avoided raising interest

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<v Speaker 3>rates at the last three meetings, it's now forecasting that

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<v Speaker 3>it could be cutting rates three times by one quarter

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<v Speaker 3>one percent next year, which by the way, would be

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<v Speaker 3>reflected with lower credit card interest rates. But you know,

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<v Speaker 3>if you're accumulating a lot of debt, you know you're

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<v Speaker 3>getting behind the eight all on that.

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<v Speaker 1>I feel like I've seen a couple of people in

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<v Speaker 1>recent days and I realized these sorts of headlines get

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<v Speaker 1>lots of clicks, which might be why people seem but

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<v Speaker 1>a couple of different people saying there's a major real

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<v Speaker 1>estate correction coming going to be historic. But things are

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<v Speaker 1>really really weird because so many people are locked into

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<v Speaker 1>these you know, two point nine percent loans. You're not

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<v Speaker 1>going to move unless you absolutely have to interest rates

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<v Speaker 1>being where they are now, prices are at least around

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<v Speaker 1>where I live, ridiculously, I still what do you think.

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<v Speaker 3>I don't look for anything like that. With a residential

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<v Speaker 3>housing market, the concern is really about office commercial real estate,

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<v Speaker 3>and we're seeing that in process, and you know that

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<v Speaker 3>has implications for the financial system and banks and the

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<v Speaker 3>owners of those properties. But in terms of residential real estate,

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<v Speaker 3>we couldn't be farther from the conditions that led to

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<v Speaker 3>the Great Financial Crisis and the housing bubble in the

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<v Speaker 3>mid early two thousands, because it was at that point

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<v Speaker 3>where there was a lot of fraud going on with

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<v Speaker 3>respect to mortgage applications and processing. It was too easy

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<v Speaker 3>to get a mortgage, there wasn't sufficient documentation, and we

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<v Speaker 3>really did have kind of a violent regulatory reaction to

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<v Speaker 3>that in a sense of overhauling the system. So that's

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<v Speaker 3>not my concern at all. We have too little inventory,

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<v Speaker 3>to your point, which is why home prices have remained

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<v Speaker 3>resilient and are still up four percent year every year.

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<v Speaker 3>With existing home sales and the number we got today.

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<v Speaker 2>Do you expect several rate cuts next year?

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<v Speaker 3>That's the base case at this point. What we require

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<v Speaker 3>for that is, for let's say, if we only get

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<v Speaker 3>three rate cuts of one quarter one percent, that requires

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<v Speaker 3>the economy to remain sort of continuing to grow, if

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<v Speaker 3>not at the average rate, close to average, meaning we

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<v Speaker 3>avoid an actual economic contraction, and that requires further progress

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<v Speaker 3>with inflation, with the headline number on the consumer price

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<v Speaker 3>index rising about three percent year over year. But I

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<v Speaker 3>will say this Jacket, I think this is probably among

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<v Speaker 3>the most important observations that I can make about the

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<v Speaker 3>current state of the economy. And it's taken me a

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<v Speaker 3>long time to get to this point, not only in

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<v Speaker 3>the show, but over the course of the process. And

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<v Speaker 3>that is that there is some disconnect between what people

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<v Speaker 3>see in the economic headlines where that where you know,

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<v Speaker 3>there's sort of this take that the economy is quote

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<v Speaker 3>unquote good and what people have experienced riving aside the

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<v Speaker 3>recent developments. And the reason for that is that retail

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<v Speaker 3>prices are essentially up nineteen percent compared to pre pandemic level.

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<v Speaker 3>So you get somebody coming to you and saying we

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<v Speaker 3>need to essentially erase one fifth of your spending resource

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<v Speaker 3>ability to spend, you'd say, well, that's among the worst

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<v Speaker 3>things that could possibly happen to me, and that's been

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<v Speaker 3>the experience, which obviously does most adversely affect those with

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<v Speaker 3>lower and middle incomes as well.

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<v Speaker 1>Yeah, I feel like a lot of people reporting on

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<v Speaker 1>economics don't understand that the fact that the rate of

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<v Speaker 1>inflation has gone down.

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<v Speaker 2>Doesn't mean the prices have.

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<v Speaker 1>Gone down or back to where they were before, because

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<v Speaker 1>that's what people feel.

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<v Speaker 2>And I actually think a lot of people don't understand that.

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<v Speaker 3>I agree, which is why we're trying to talk about

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<v Speaker 3>it more to try to sort of bridge that divide

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<v Speaker 3>of understanding and sentiment. And ultimately it's about empathy, right,

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<v Speaker 3>In other words, you can't just keep whistling in the

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<v Speaker 3>wind and not acknowledge the wind. And so I want

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<v Speaker 3>to point out if people are so inclined. My colleague

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<v Speaker 3>Sarah Foster a Bank, has written a tremendous piece in

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<v Speaker 3>the last couple of weeks which gets to the notion

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<v Speaker 3>of what some particularly and social media, and there I

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<v Speaker 3>say TikTok, referring to as either the quiet recession and

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<v Speaker 3>the silent recession, and that is what people are experiencing,

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<v Speaker 3>is this loss of purchasing power versus the technical definition

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<v Speaker 3>of a recession which has not been met, but doesn't

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<v Speaker 3>make those people feel any better. Or maybe I just

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<v Speaker 3>say all of us feel any better about the diminution

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<v Speaker 3>of purchasing power.

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<v Speaker 1>Yeah, and obviously emotionally, if you're feeling something and somebody

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<v Speaker 1>tells you know you're not, it makes you angry.

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<v Speaker 2>And when I fully understand, because we talk about this

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<v Speaker 2>all the time.

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<v Speaker 1>That the rate of inflation is what a third a

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<v Speaker 1>fourth where it was, it it's worse. But if I

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<v Speaker 1>take my two kids to Kentucky Fried Chicken and I

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<v Speaker 1>spend sixty bucks for the three of us, I still.

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<v Speaker 2>Go, oh my god, I can't believe I spent sixty

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<v Speaker 2>bucks at Kentucky Fried Chicken.

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<v Speaker 3>Yeah, imagine how the chicken fell.

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<v Speaker 2>Exactly.

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<v Speaker 3>It's like I'm not even the middle man, but no,

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<v Speaker 3>I mean absolutely, And we've all had that experience where

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<v Speaker 3>you go, maybe it's a sandwich shop or even to

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<v Speaker 3>get a salad, and you get out of there and

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<v Speaker 3>and you're like, wow, how did that cost twenty twenty

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<v Speaker 3>five bucks?

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<v Speaker 1>For sure, how long do you think it takes for

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<v Speaker 1>people to get used to where prices are? So even

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<v Speaker 1>if we got back to two percent inflation, you know

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<v Speaker 1>the target it's going to take a while before I'm

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<v Speaker 1>not shocked by the prices of things. And I was

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<v Speaker 1>not an adult back in the late seventies early eighties

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<v Speaker 1>the last time we did this. How long does it

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<v Speaker 1>take people to get used to new prices as a

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<v Speaker 1>set point, I.

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<v Speaker 3>Don't know that everyone will get used to that, but

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<v Speaker 3>over time, barring any you know, sort of catastrophic economic

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<v Speaker 3>developments that will include the likes of hyper inflation or

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<v Speaker 3>you know, an economic contraction that really does send a

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<v Speaker 3>lot of people to the virtual and employment lines, it's

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<v Speaker 3>just going to take, you know, a process, and it's

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<v Speaker 3>going to be different for everybody, depending on their financial capability.

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<v Speaker 3>For people who have you know, well above let's say

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<v Speaker 3>the average household income you know, to them is largely academic, right,

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<v Speaker 3>But to I would just say, you know, the typical household.

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<v Speaker 3>I think it's going to take some time. And what

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<v Speaker 3>is helping with this at the moment, just in terms

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<v Speaker 3>of real time data, is that wage growth is now

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<v Speaker 3>outpacing the recent or current inflation rate. So that means

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<v Speaker 3>sort of only with respect to real time you are

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<v Speaker 3>doing better. But that's also like, well, you got rid

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<v Speaker 3>of your fever at the moment, but you also, you know,

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<v Speaker 3>still have some residual effects from the illness that you

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<v Speaker 3>are recently suffering.

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<v Speaker 2>You personally, are you done with your Christmas shopping?

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<v Speaker 3>Great question that gets to a very controversial subject here

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<v Speaker 3>in the hammer ulsehold, which is I, at thirty plus

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<v Speaker 3>years of marriage, I still don't seem to do a

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<v Speaker 3>great job purchasing from my wife. But I think that meaning,

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<v Speaker 3>you know, there's a disconnect between my comprehension and other things.

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<v Speaker 3>But in terms of the purchasing process, the answer, yes,

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<v Speaker 3>we have, we have reached that sought after finish line.

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<v Speaker 2>Fantastic.

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<v Speaker 1>Mark Hamrick, Washington Bureau Chief, Senior Economic Analyst, bankrate dot Com.

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<v Speaker 2>Thanks for your time today, appreciate it, my.

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<v Speaker 3>Pleasure, Happy holidays. Happy to do your dollar there, Jack, thank.

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<v Speaker 2>You, thank you, and you two. Also. I love the

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<v Speaker 2>fact that he kept up.

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<v Speaker 1>His his you know, uh, straight economic delivery through his

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<v Speaker 1>answer about the Christmas gifts.

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<v Speaker 2>Uh.

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<v Speaker 1>The process for buying the presidents has not met with

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<v Speaker 1>the expectations