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[00:00:00] Welcome back to the What's Your 1 More Podcast. I'm your host, Quinton Harris, and you are dialed in for episode two 30. [00:00:05] So kind of excited about this. We're going to talk about my forecast and why we [00:00:10] continue to say, Hey, the fed rates cuts are coming. You know, obviously, we just did that entire forecast, but we're [00:00:15] going to talk about some of the metrics that have come out.
[00:00:16] Post that forecast that are further supporting what we're [00:00:20] saying and why. So we're also going to talk about our travels down to Austin as we head there next week to check on the real estate [00:00:25] market and a couple of meetings as well, but we're going to dive into what's going on there and as to why that [00:00:30] might be one of the hardest hits markets here in the country.
[00:00:32] That and more on this episode of What's Your One More.
[00:00:34] [00:00:35] [00:00:40] Oh
[00:00:40] So welcome back. So next week, we take a trip down to Austin for a couple of corporate meetings. And [00:00:45] while we're there, we're going to explore the real estate market. You know, we've heard from many of you and the data suggests that, [00:00:50] you know, that's one of those pockets, you know, I always talk about real estate as a whole.
[00:00:53] And I've mentioned there are pockets in [00:00:55] the United States as to maybe have, you know, taking a step backwards or, you know, might be hip. There's no [00:01:00] doubt, no arguing that Austin is at the top of that list. And I'm going to go there and have a corporate [00:01:05] meeting, talk to some people, but more importantly, Been most of the time, uh, over the weekend, exploring that real estate market [00:01:10] and what exactly is going on there and get a feel from the community as to is it hot, is it not?
[00:01:14] Are they [00:01:15] expecting a further boom or bust, or is there opportunity in a market like that that gets [00:01:20] overlooked in moments of, disparity? So I'm pretty excited about that and I'll report back next week [00:01:25] as to what our findings are there. But this episode I wanna talk about. [00:01:30] Jobs over inflation. That was one of the themes of our forecast jobs over inflation And I had made [00:01:35] mention that I thought inflation was under control for the most part I said there'd be a lot of vacillation [00:01:40] up and down, you know, but for the most part inflation has been tackled It has been tamed.
[00:01:44] and that's [00:01:45] why I think you see the federal reserve's commentary as to hey, listen We're going to keep an eye on it But [00:01:50] we are focusing on the job market. So when we look at job markets, we look at a vast [00:01:55] features of things. You know, you have the private payroll, which is the ADP report. You have the [00:02:00] BLS report, and you guys know if you've listened to the show how I feel about that.
[00:02:03] Um. And then [00:02:05] you have jobless claims that come out once a week, and then you have continuing claims. And [00:02:10] so all of these things are a lot of different metrics that report real time job situations and then [00:02:15] the previous month's job situation. Now, for example, the reading that you get in the month of [00:02:20] January is going to be for the month of December.
[00:02:22] Now, inside of that forecast, [00:02:25] I warned that I said, Hey, listen, the reading that we're going to get in January is going to [00:02:30] be a little, better than expected. And the reason I said that was because it's a seasonal [00:02:35] situation, meaning that if you think about it, there's probably more jobs in December from a retail standpoint, [00:02:40] just because of the holidays than there is going to be maybe in the month of January.
[00:02:43] So my [00:02:45] expectation was that we would beat estimates in the month of January, which is what we did. And then my [00:02:50] forecast was in February, we're going to see those job reports from January showing those jobs have been [00:02:55] taken away and fallen off. Now, during all of that, one of the things that I like to measure is, hey, [00:03:00] what do those jobs really look like when the report comes out?
[00:03:02] Because if your theory is, hey, listen, this is a retail [00:03:05] job, now go back to when you were in your teens. I know that when I was a teenager, one of the easiest times for me to get [00:03:10] a job was during the holiday season, that November, December, and you could build up a lot of hours. You could work a [00:03:15] lot of overtime and you could fill gaps that were needed.
[00:03:17] And hiring was much easier during that [00:03:20] process. So. If I use that theology, which I believe still holds true in today's market, [00:03:25] you're going to see a lot of gaps get filled in jobs. And then the question becomes, are those [00:03:30] jobs gone or do they have longevity? And I think we know the answer to that. And so when I get these reports, [00:03:35] I kind of like to dive into them.
[00:03:36] And that's one of the things that we're going to look at today. But again, the jobs [00:03:40] over inflation is going to be the key in the Federal Reserve's next move. Now, if you recall, the Federal Reserve says, Hey, we're going to [00:03:45] make two cuts on the year. Again, I called that a head fake. I think that's continuing to hold course [00:03:50] here.
[00:03:50] And I do believe that you're going to get more than two. I think we're going to get four, maybe six cuts on the year. But [00:03:55] again, there's a lot of people that don't agree with me on that. And, we'll see where it lands here in January to start. [00:04:00] So the thing about the job report that I want to start in on this is that in January, The [00:04:05] job report came out for December and it showed that we beat estimates significantly, by the way, [00:04:10] because the, the seasonal adjustment says we were expecting 160, 000 job reports on the [00:04:15] BLS report and we ended up getting 256, 000.
[00:04:18] So this isn't [00:04:20] uncommon that the beats happen like that. Typically what happens is markets tend to react to that. [00:04:25] pretty quickly, right? But what I like to take a look at is in the numbers at devil's in the detail. So how can I [00:04:30] get down in the weeds of this and take a look at it? So the other thing that came out was unemployment.
[00:04:33] Now I talk about unemployment all the [00:04:35] time because I think that's the needle mover. If you look at it, we know the federal reserve in the most [00:04:40] recent meeting said of the 19 voting members, 14 of them said, Hey, [00:04:45] listen, we're good with unemployment at 4. 3. If we get above 4. 3, we start to [00:04:50] get a little antsy and we need to start making some rate cuts, maybe even some significant rate cuts.[00:04:55]
[00:04:55] The other five remaining members said, Hey, listen, 4. 5, we're comfortable there. 4. [00:05:00] 3 doesn't scare us. 4. 5, there's an issue. And if it gets to that, we agree too, we need to [00:05:05] make significant rate cuts. Well, so how's that unemployment? number determined was determined by [00:05:10] household survey. We've talked about that numerous times on here, but unemployment number went from 4.
[00:05:14] 2 [00:05:15] to 4. 1. Again, I take a look at this and I go, wow, okay, that's gone [00:05:20] backwards. Is that because of what I just mentioned, more jobs created during that seasonal [00:05:25] time. So let's take a look at this here. The household survey reported, and I remember household survey. Ring, ring. Hey, do you [00:05:30] have a job? Do you not have a job?
[00:05:31] Inside the household survey, [00:05:35] 478, 000 jobs were created in that survey. Of those [00:05:40] 478, 000, the ages of those, what's interesting to me, the bulk of those [00:05:45] jobs are of the age 24 years and younger, 360, 000 of the [00:05:50] 478, 000 jobs. So, you could argue 70 percent [00:05:55] plus of those jobs We're the ages of 24 and younger.
[00:05:59] Now, let me take it a [00:06:00] step further of that 360, 225, 000 were [00:06:05] between the ages of 16 and 19. We know those are not full time jobs, like 16, [00:06:10] 19, you're still in high school for the majority of that age group. You're going to class, you're working [00:06:15] what part time. So those are part time jobs. Those are not full time jobs, but yet those are reflected in the [00:06:20] unemployment rate.
[00:06:20] There's a flaw, right? We know there's a flaw in the data. We've talked about that over and over again. I'm [00:06:25] going to suggest that that unemployment rate probably should have been closer to the 4. 3. [00:06:30] Remember that number we just spoke about it should have been closer I believe when these February reports come back [00:06:35] and we start seeing January's numbers filter into that report We're gonna be at that 4.
[00:06:39] 3 [00:06:40] Well that alarms 14 voting members of the Federal Reserve right then and there the second month into [00:06:45] the year This is another reason why I believe the rate cuts are coming Sooner than later [00:06:50] and you're going to get more than two. You're going to get four. I also believe The unemployment [00:06:55] number is not going to miraculously evaporate and come down because when we take a look at inside [00:07:00] these jobs, the part time versus full time continues to be very lopsided in the part time [00:07:05] world, not the full time world.
[00:07:06] I mean, we already know from the jolts reports and we already know from the employment [00:07:10] reports that getting a job right now, the duration to get a job is taking longer [00:07:15] than it has in quite some time. You could argue maybe historically it's taking longer than it has [00:07:20] in the last 20 years. If we look at the part time versus full time support [00:07:25] numbers here, one of the things we're seeing is that the part time numbers are accumulating [00:07:30] 247, 000 of the job reports, 247, 000.
[00:07:33] Are part time workers [00:07:35] compared to 87 000 full time, you know, so when you're creating part time jobs, you're not improving the [00:07:40] economy What you're doing is you're taking someone and you could even argue that some of those are second jobs [00:07:45] And then they're being double counted, you know, and that is a challenge in this market The wall street journal [00:07:50] just reported of the job postings that are out there Now remember that's that's important because job [00:07:55] postings kind of give the notion that there are jobs to be had right?
[00:07:58] That 30 of the job [00:08:00] postings are ghost job postings, meaning they don't really exist. They're being posted, but they [00:08:05] don't exist. And so this adds to the fact that the employment market is not as strong and is not as [00:08:10] lucrative as it once was. Plus these part time jobs are suggesting that, hey, there's more part [00:08:15] time, maybe it's 16, 19 year olds that we just talked about that are in high school, but it could also be people having a second job.
[00:08:19] And [00:08:20] we know that's happening because the cost of living hasn't come down. So people are taking on second jobs to [00:08:25] facilitate their, not lifestyle, but just their basic means of living because the cost of items have [00:08:30] gone up. And going back to that duration of the unemployment, this is important to me because [00:08:35] December of 2024 shows in this household survey, same survey, that the unemployment is [00:08:40] lasting longer, meaning the ability to get a new job from when you've lost your job is now [00:08:45] up to 23.
[00:08:46] 7 weeks, 23. 7 weeks. That's [00:08:50] a long time. That's up from the previous month of 23. 6 and it's up year over year [00:08:55] from 22. 2.
[00:08:56] ​ [00:09:00] [00:09:05] [00:09:10] [00:09:15] [00:09:20] [00:09:25] [00:09:30] [00:09:35] [00:09:40] [00:09:45] [00:09:50] [00:09:55]
[00:09:57] It's taking much longer to get a job in this [00:10:00] environment than it has in the past. And so, is that because employers [00:10:05] aren't hiring? Is that because people are staying placed in a job that they have, [00:10:10] whether they're happy or not?
[00:10:11] Or, or what is it? There's a lot of different questions to [00:10:15] that. One of the things I would suggest on here is that. Maybe you're just maybe you're making a [00:10:20] lot more than you were making and you don't want to go get a new job Maybe maybe when you're [00:10:25] leaving a job because you were forced to leave it you're taking a job for lesser pay There's all kinds [00:10:30] of things that are going on there But one of these we take a look at inside of the business survey And said, Hey, [00:10:35] how many, what's the average, what's, what's the average hourly earnings?
[00:10:38] Right? That's a measurement that's [00:10:40] taking place there. And we look at like, is the rate of what you make per hour going up or going down? [00:10:45] So in this recent survey, it shows that yes, the amount of average [00:10:50] hourly earnings has gone up, but the amount of hours worked. are starting to come [00:10:55] down. And when you do that math, what you're seeing is that there is an increase in the, and [00:11:00] this is where, this is where the headlines are deceptive because it'll say, Hey, the average hourly earnings are going [00:11:05] up.
[00:11:05] Yeah, they're going up. The actual amount of earnings are coming down. And the reason the [00:11:10] earnings are coming down is because the hours worked during the work week are also coming down. And when you measure this, what you're [00:11:15] finding out. is that year over year, the average weekly earnings are coming [00:11:20] down 3.
[00:11:21] 6, they're coming down from 3. 6. And why is that important? Because it's, it's equating [00:11:25] out to 1, 224 per week work or so like [00:11:30] you take a look at that. So like that,the average, the average earnings per week is 1, 224. Okay. [00:11:35] Simple math.
[00:11:35] Multiply that times, you know, 52 divided by 12. That's your monthly income. [00:11:40] So the reality on that is that that's why you're having people taking on part time jobs [00:11:45] because that Very much could be argued is not enough to live on. And so is [00:11:50] that the sign of an improving economy? Is that the sign just because the job postings are up and just because the [00:11:55] job market is saying we created more jobs?
[00:11:57] I don't think so And I don't think the federal reserve thinks so either [00:12:00] and I think when those unemployment numbers hit In the month of february that are going to reflect january's numbers I think you're going [00:12:05] to see a little bit more urgency from the federal reserve than what we've seen and so sometimes you have to ask like [00:12:10] from a consumer standpoint like Hey, how are the consumers feeling?
[00:12:13] That's why they do consumer sentiments, right? [00:12:15] Not just household surveys, but they do consumer sentiments. And when you look at that from the University of Michigan, who leads the [00:12:20] consumer expectation and the consumer sentiments, they've been the kind of the gold standard for this. What we're [00:12:25] finding is in the most recent survey, there's the largest gap between December of [00:12:30] 2007 and January of 2001.
[00:12:32] There's the largest gap between rising unemployment and [00:12:35] declining unemployment, meaning that go back to 2007. Like what took place in 2007? It was a pretty large real [00:12:40] estate depression that we're in and in January of 2001, what else happened during that time? [00:12:45] Well, you're coming out of the dot com bubble, right?
[00:12:47] So during these two negative [00:12:50] recessionary cycles, what you found is that there were large gaps between people's sentiment and hey, listen, I [00:12:55] think unemployment's going up or I think unemployment's going down. So in the most recent [00:13:00] survey, 50 percent of the people in this survey think. Unemployment's going up.
[00:13:04] It's [00:13:05] not getting better. And only 16 percent thought it was going down. So that's a gap of [00:13:10] 34%. That's the largest gap since both of those errors. That tells you from a [00:13:15] consumer, when we look at consumer psychology, we talked about that in our forecast. It is so underestimated [00:13:20] and vitally important in many different things.
[00:13:21] Spending habits, the ability to [00:13:25] stay put in one job, go look for another. Buying houses. I mean, there's a lot of things [00:13:30] in that psychology that take place and this consumer I think we had a guest call the consumer [00:13:35] economics psychological, you know impact that's going on This is playing a large gap in that and [00:13:40] so what's playing another larger role in as media headlines a lot of confusion a lot Of [00:13:45] things that are not being explained which is what we try to do on this show And I've talked about a lot of different metrics.
[00:13:49] I've [00:13:50] talked about a lot of different gaps, and I would be remiss if I didn't say, hey, all of these are in our YouTube channel at what's your [00:13:55] one more with the number one. That's at what's your one more with the number one. But inside of these, [00:14:00] these, these graphs on here and these things that we're talking about, I'm seeing a red alert [00:14:05] over and over again.
[00:14:05] And that alert is that, hey, listen, we're not just going to have two [00:14:10] cuts. We're going to have more than two cuts. And in that forecast, we talked about why it doesn't take. [00:14:15] Many cuts at all for these rates to start coming down, and we also talked about affordability [00:14:20] being a major issue right now. Cost of the product, price in which you, you know, finance that [00:14:25] product, and then ultimately the income in the household when we just talked about the income, it's going to take rates [00:14:30] coming down to create that affordability metric that's there.
[00:14:33] But let's take, let's take just a [00:14:35] step back. One of the things in that forecast we talked about was the lack of inventory. We [00:14:40] harped on that. Our hearts go out to the people in, in California and what they're [00:14:45] dealing with. That is an awful situation. My wife's from Los Angeles. We have family that lives out there.
[00:14:49] That is an [00:14:50] awful situation. thank God we have family distance from those fires. But I mean, even if you're [00:14:55] distance, you're affected because they've shut your power off for a week to help fight the fire. So there's people that have effectively had to leave even [00:15:00] though they're not impacted directly by the fires, but because they don't have electricity.
[00:15:03] And so there's a lot of [00:15:05] things that are impacted by that. But one of the Alarming things that are impacted by that is just the sheer housing [00:15:10] itself. That's no longer there And that is a another impact [00:15:15] to the inventory situation out there out west That is going to impact other [00:15:20] parts of the country And you can see it already starting to develop because people are going to say hey listen [00:15:25] How am I going to rebuild out here?
[00:15:27] There are major insurance issues out there, some that are [00:15:30] starting to surface right now. You're seeing these rental, price gougers that are jumping [00:15:35] to the market where it's, they're offering people to rent, but exuberant prices like 25, 000 a month to [00:15:40] rent a property that would normally rent for 6, 000 a month.
[00:15:42] That's illegal by the way, but they're doing it anyways. [00:15:45] And so there's a lot of people that are saying, well, if I'm working from home, maybe, maybe this is, maybe this is an [00:15:50] opportunity for us to move. There's going to be a displacement feature that happens from all of that, [00:15:55] and it may displace across the state of California.
[00:15:57] It may make its way out into other states, [00:16:00] but this is not going to help the inventory situation. It actually puts us back [00:16:05] further down the line than where we were because now you have an additional demand, a [00:16:10] necessity demand that's come to the market that is going to look a lot different than what it did when we did that [00:16:15] forecast.
[00:16:15] And I talked about there are things that can cause an acceleration in the market. You [00:16:20] know, obviously you never want to see anything like that happen, but it has happened and it's something we're talking about. That [00:16:25] acceleration is something that's going to be very, very, imperative to watch as we kind of take a [00:16:30] look at this first quarter unfold as we go into that February, March, April, trend line of [00:16:35] what the supply versus demand forecast looks like on there.
[00:16:37] And again, our hearts go out to those people in California. That is [00:16:40] just an awful situation, and by no means am I overlooking that. I'm just using that as an example of [00:16:45] things that cause this supply versus demand situation, because I could be talking about it here in Florida. [00:16:50] I mean, it could be a hurricane situation.
[00:16:51] Those things do happen, and we talked about that in our forecast. [00:16:55] And so, it'll be interesting to see how that looks. I do think that's going to drive prices up further [00:17:00] and we're already seeing it in that rental market illegally, by the way, in the rental market, but on the actual purchase side of things, I think it's [00:17:05] going to actually drive up home prices because you shrunk that supply down even further.
[00:17:09] And I think that's [00:17:10] only going to get worse. Last thing I wanted to hit on was this week we got the consumer price index, [00:17:15] also known as the CPI. That's what affects you and I when we go to the grocery stores, what [00:17:20] affects us on our day to day purchases. And it was a great warming sign because it actually came down way less.
[00:17:24] [00:17:25] Way less than expected in the markets like that. the markets were excited to see that And [00:17:30] you're starting to see the rewards not only in the stock market crypto side of things But also in the [00:17:35] bond market and we've seen We've seen a significant what I would say a significant reversal [00:17:40] in the bond market for us Which is bleeding down into interest rates, which is a warm welcome sign this goes back to my [00:17:45] point Federal reserve doesn't have to do anything for this to happen.
[00:17:49] We just have [00:17:50] to continue to get the metrics come in and let them facilitate through the system, through the [00:17:55] lagging indicators to show us what we already know is happening out there. And the most recent one that [00:18:00] we're going to be, kind of cheering on here is the CPIs. We kind of roll into the Fed's favorite form of inflation the [00:18:05] following weeks here of the PCE and all signs are pointing towards that coming in favorable as well.
[00:18:09] Again, [00:18:10] the Federal Reserve doesn't do anything. And I will say this, if the Fed pauses in January, That's not a bad thing. [00:18:15] It's not a bad thing, but it's coming in February if they pause in January, and I'm not so [00:18:20] sure that they will, but if they do, you can bet it's coming in February and a pause. Isn't that bad?
[00:18:24] Cause we [00:18:25] talked about consistency would be good for the markets and it would be a welcome sign with these indicators coming in at [00:18:30] the manner in which they're doing. So stay tuned, lower prices or excuse me, lower rates are on the way. [00:18:35] Prices are going to be a challenge in real estate. As I said, my forecast, I do think they will continue to go [00:18:40] up.
[00:18:40] There'll be pockets where they don't. One of the reasons that we're going to be talking about that in Austin, but for the [00:18:45] majority, it's going to be going up across the United States and it's something to take a look at. And if you have an opportunity to take advantage of that [00:18:50] now before the demand picks up and before the rates drop, furthering demand is something I would [00:18:55] consider.
[00:18:55] Guys, if you like what you're hearing, please share this podcast. If you would share us on Apple, share us on [00:19:00] Spotify, check us out at our YouTube channel at What's Your One More. We love the commentary. Please hit the subscribe button. I'll All of our charts, [00:19:05] all of our forecasts will be on there, and wanted to give a special shout out to our friends over at MBS Highway for [00:19:10] all of the graphs that they provided for this episode.
[00:19:12] Until the next time, we'll see you at What's Your One More.
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