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