Good news in the US economy.
It grew by an annual rate of nearly five percent in the third quarter, beating expectations.
Well, that's a short clip.
Five percent is a high number, and that's why we need to talk to a senior economic analyst, not a junior economconomic analyst who wouldn't know a prime interest rate if we walked in the room and slapped him in the face. We're talking a senior economic analysts like Mark Hamrick with who is the Washington Borough chief with bankrate dot com. Mark, Welcome to the Armstrong in Getty Shaw.
Are you good to be with you, gentlemen?
Thanks for having me.
What are you dressing as for Halloween?
Oh? I can just go as myself. That scares plenty of upol and it really saves money.
Right, So five percent quarterly growth is huge, isn't it?
For sure? This is annualized, So what we do is take the number and multiply it by four to get what it would be for the full year. But you know, the long term trend is about one point eight or two percent, So we were twice the growth rate of
the previous quarter and above the long term trend. But you know, as I wrote in the note that I shared with our friends sort of across the spectrum and then LinkedIn and elsewhere, take a good look at that, because you won't be seeing a number that high again for a good while more likely.
Okay, so why is that? And I know the whole raisin interest rates thing. The point to that is to slow down the economy, to try to you know, stop inflation. And then we're growing this fast. So yeah, what's going on there?
Sure? Well, first of all, let's acknowledge and if we're in a mood to celebrate the fact the economy has proven more resilient and ultimately robust than most of would have given that credit. And in our quarterly economy surveys that we've been doing for many years, we go back to the first quarter of last year twenty twenty two, when they were starting to say collectively that the risk of imminent recession we're elevated. And here we are in the fourth quarter of twenty three and we don't have
a recession that is quantifiable occurring right now. So a lot of things have been done to sort of get us where we are, and there are a lot of things being done to sort of unwind the parts of that that can be unwound. As you know, there was a lot of fiscal stimulus put into the system by two congresses and two presidents in response to the pandemic.
We had interest rates at record low levels, not only during the pandemic but for the broader part of the previous fifteen years, sort of barely deviating from that in between the pandemic and the Great Financial Crisis. And there is some long term federal spending related to infrastructure, etc. That are not making a huge difference, but do make a difference on the margin. The other part is that consumers really did accumulate more savings than they would have
had a tendency to do during the pandemic. Part of that was forced, part of that was physical assistance in the form of things like the child tax credit. And as we've seen, there has been some component of revenge spending, as witnessed by the would be fistfights that are occurring on airlines at an airport, so.
All revenge spending.
So a lot of economics is you know, you're an expert on this, but is you know, pretty hard numbers, nuts and bolts, you get them. This many bushels of corner this many, you know whatever, But a lot of it is an emotion, especially when you get to the consumer spending, which is two thirds of our economy. That's just a motion, and so you think we had money burning a hole in our pocket. My concern is what
the way these numbers don't fit together. Of course, on the consumer spending is I'm not feeling wealthy, and nobody I know is. And every time you go to the grocery store, or go through a drive through at McDonald's, or get gas or whatever, you're shocked by the price. Yet we continue to spend. What's the psychology going on there?
Sure well you weren't alone in any of those places, I'm guessing, so you have plenty of company. That's one thing. The other part is inflation elevates the dollar adjusted or measured amounts of spending just a loan. So if we have inflation that's close to a four percent annual increase, that helps to get you some of the increase. But the pointing has been up on an inflation adjusted basis
as well. So what I would say is, and I think that's a very good point you're making that you know we are not all go sort of an ancient cultural reference or pop culture reference here. We're not all mister Spock, right, We're not all acting only with logic and so, and you know, the experts in psychology would tell us that most of the decisions we make are actually sort of emotionally based and not sort of you know,
using the avacus to figure it out. So I do think that there's a big part of that absolutely, and it's not sustainable at its current pace. I think that's the most important part of it.
Well, and in the economy, can't count on a Taylor Swift concert every summer.
Either, That's right. Absolutely.
I'm a out of concern is with the consumer spending because I just had this thing in front of me, the number of people, it's a high number of people that are dipping into their four to one k's for emergency spending or putting it on credit cards. How much of the consumer spending is stuff we really shouldn't be spending.
Well, what I would I would sort of reverse engineer that and say that, you know, we survey on these sorts of issues at bank rate over the years all the time, and the reality is that most Americans are living paycheck to paycheck, if they were not spending on all those things and they had some cushion and their finances, which you believe a good number of people do, they could be channeling that money to not only emergency savings,
but two retirement savings. And one of the more recent surveys we did indicated that the majority of Americans feel that they are behind on their retirement savings and perhaps no surprise, those who are more senior ie realizing they might actually get to a retirement phase or the risk
is there, are feeling that more acutely. So what you know, the other part is, you know, we've been talking lately and I don't know if you guys have heard this phrase, but it's come up in some of the discussions that people have sort of come to us about. And we'll
see whether it has any stickiness or residence. And that is a concept that's being referred to as soft saving or savings, and this is an idea that it's being associated with sort of the youngest cohort er age group that sort of adults and that is eighteen to twenty six gen z. And what they're sort of being associated with is an idea that essentially, you should try to live for today and not think the career is the be all end all.
Yeah, thanks thanks hire late News.
Yeah, well, I think there are ancient fables about that attitude and how well it works out.
Well. I mean, you know, ballance is important, right, and I think many of us were reminded about the importance of that when we were sort of grappling with life death issues during the pandemic. And it's also relevant in the discussion of people demanding more from their employers. That isn't just about compensation. That it's about, you know, can there be some flexibility if that kind of work allows it, and you know, four day work weeks and remote work,
hybrid work. But you know what I would say is that to bring it back around to the GDP question, we are fortunate that we're still looking at at unemployment rate of three point eight percent, and we'll get an update on this next Friday. That is remarkably close to the historical low three point four percent we had in April,
that was a fifty three year low. People can logically or appropriately debate, you know, the quality of all those jobs and the statistics that also point out that there are millions of Americans working part time that would like to have full time work, millions of Americans who would like to have a job but are not looking for one. Those are you know, those are issues that are worthy of consideration as well. But the reality is the unemployment
rate is low. We are not in a recession as it's as it's defined by those who define such things. But that doesn't mean that just because the sun is shining today that there won't be rain on down the road, and so we should be trying to prioritize our emergency savings paying down debt when credit card debt is at the highest level we've ever seen it.
Hey, Rock Chuck Jayhawk. I see you went to the University of Kansas.
Yeah, thank you, Kanson. Even though I'm in Maryland.
Where in Kansas are you from? I'm a native Kansas myself.
Well, my dad was a newspaper editor and took us to a little town on the Camp Oklahoma border called Coffeeville.
I know it.
I'm from a little town in southwest Kansas called Scott City.
So I'm from the middle of nowhere Kansas myself.
I love it.
So the first thing you said before we let you go, and we're talking with Omark Hamrick, who is a senior economic analysis with analysts with bankrate dot Com. We're not going to see these kind of numbers anytime again soon.
Why is that.
Just so many things in the transom here that are arguing against it, not the least of which is the Federal Reserve is vowing to keep interest rates high for longer, having really had an unprecedented in our lifetime tightening cycle going back to March of last year. We'll have a FED meeting next Wednesday. I'll be attending and we'll hear from Chairman Powell at that moment about the future direction. But the Fed shows no intention of reducing interest rates
anytime soon. Now, if there were, you know, an absolute slow down in the economy, they'd be looking at that. But we just had a refresher today on the Fed's own preferred gauge of inflation, and that's well above their target of two percent. So they may feel that they can leave rates where they are, and that's still having a restrictive impact on the economy. And the other part is, you know, rates are sort of determined two ways. One is through the Federal Reserve and other central banks and
the other in the financial markets. And so we look at things like treasury yields, which might seem very wonky and maybe irrelevant, but actually they're incredibly relevant because they help to determine the ability or the willingness on the part of investors to send stock prices higher. And we know that stocks have been under some pressure of late
because of those rising yields. And those rising yields also are determinedive of what happens with mortgage rates, and we see mortgage rates averaging a thirty year fixed about eight percent right now, which is the highest sense two thousand.
So the housing market looks to be sort of headed for another recession like experience here, because you're talking about a monthly payment on a mortgage that would be essentially one thousand dollars a month more than it would have been just about two plus years ago.
That's a stunning statistic.
Yeah yeah, yeah yeah. And that's a four hundred thousand dollars. So in terms of you know, a lot of places in the country, you'd be lucky to find a.
Four hundred, right like the Bay area of California. Hey, we appreciate your time. Enjoyed that and from from from Cannes and to kNs and thank thanks for coming on today.
Appreciate it my great pleasure.
Enjoyed a great deal and we'll look forward to connecting again down the road.
All about you bet thanks he getting