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We do begin with that payroll report, hiring advancing at the slowest pace since twenty twenty in October. The unemployment rate did remain low. A lot of distortions, though, severe hurricanes, that major strike at Boeing weighing on those figures.
As far as numbers go.
Non Farm payrolls increasing at twelve thousand last month, hiring over the previous two months weaker than previously thought. The unemployment rate held steady at four point one percent. Hourly earnings ticked up. Acting Labor Secretary Julie Sue commented on today's report earlier on Bloomberg TV.
We don't have granular data about that, but I think it's, you know, it's a rational conclusion that the impacts of the hurricanes were devastating. I mean they were devastating to human life. They were devastating to those communities in the southeast, but they also are showing up in the jobs report. Having said that, the overall labor force participation rate also remains.
You know, it's steady.
I was Acting Labor Secretary Julie Sue earlier on a Bloomberg TV. We got Michael McKee with us. He's Bloomberg News International Economics and Policy correspondent. He joins us here in the Bloomberg BusinessWeek studio, Mike, that headline number coming in way below estimates of one hundred thousand. How much of this can we attribute to hurricanes and to the strike versus an actual slowdown in the economy.
Well, as Julie Sue said, it's really hard to tell because we don't have the granular data. We do know that we lost forty six thousand manufacturing jobs and there were forty four thousand workers on strike in the manufacturing sector, both Boeing and a textra in factory during the month. So that's pretty accurate there. You can add those back in, at least some thirty eight thousand of them for Boeing, because they're back there in theory going to go back
to work if they approve the contract. The hurricanes is the hard part and part of it is that we had a very low response rate from companies who might have been busy sweeping the water out of their factories rather than filling out the form for the Department of Labor, and so it's hard to know how accurate these numbers are. We do expect a big revision up once companies start sending in their accurate numbers, and so for the next two months we'll probably see the numbers revised up.
So you kind of have to.
Look through the headline number. I know your question is going to be what is the FED thing. FED is going to think exactly that, but they're going to pay attention to the unemployment rate, which on a two decimal number was basically unrevised at four point one percent.
So it doesn't look like the labor market it's getting any.
Worse, So especially when you have next week, of course, we have the US election just a few days before the FED decision. So how much does this number end up being political? And if it does, what do people need to keep in mind?
It's going to be interesting to see if it has any political impact. It took about ten seconds for the Trump campaign to send out their first negative comments on it, and they've been doing that all day, and we don't know how that's going to affect Americans.
In part, it'll depend on how the media play this.
If they play up the idea that we lost a lot of jobs, it plays into the Republican narrative. If they say hurricanes cost a lot of jobs, then it may not really resonate with people. Obviously, if they lead with the unemployment rate, it won't have much of an effect at all.
But that's I mean, that's politics.
You're going to have people always trying to accentuate the negative.
Well, that's what I wanted to focus on, actually, because last month you were sitting in the studio with us and I had you weigh in on a tweet from a post on x from Marco Rubio, Senator of Florida, a state that was severely affected by hurricanes in the last month. He called the September jobs numbers a fake jobs report. He got a lot of pushback from a lot of professional economists who and people within the government,
people who understand where this data comes from. He posted that they revised the estimated job gains in both August and September by a combined one hundred and twelve thousand, and he reiterated the idea that the jobs report he calls it the Biden Harris Jobs Report were fakes used by the media to give them positive headlines, saying I
told you so. He obviously didn't learn his lesson. But what do you make of What do you make of what he said and what he's saying, because a lot of people point to these.
Backwards revisions, Well, he either doesn't understand statistics or he's a politician, and a far be it for me to say that politicians would not tell the absolute truth or explain things in nuanced to people. But the number for September originally was two fifty four, came out at two twenty three. So if that's a significantly terrible change, I'm not sure people are going to see it quite the same way. The Bureau of Labor Statistics does the absolute best with what they can.
They are not biased at all.
This comes up every so often where somebody will say that they're manipulating the statistics to help one side or the other. But if you look, if people want to go to my ex account economy.
On X, I just posted a short time.
Ago a graph that shows the revisions during the Biden years, and sometimes they're up and sometimes there down, and.
There's no pattern to it.
So at this point you have to say, why are you doing that other than you're just trying to confuse people.
Of course, next week we're not going to have DOP plots or the economic projections from the FED statement just given that they are quarterly, So we'll get those again in December, as you knew. But what do you expect FED Chair Pow to say in that statement as far as when it comes to that forward guidance, and especially once a tricky week, because we rarely do see a FED decision happen the same week as a US presidential election.
Well, he will dodge all the questions of the presidential election because the FED doesn't know. First of all, we may not know who won, and second of all, they don't know what policies will actually be enacted. The candidates make their pledges, but as they say, the President proposes, Congress disposes, so we aren't going to know for a while what the actual policies are going to be. So if they can't do anything about it, so he'll pass on that kind of question. But in terms of trying
to deal with this employment report. He'll say, we're going to look past the headline number because of the distortions. We'll look at the unemployment rate, we look at average hourly earnings, which were not terrible, and we're looking at a lot of data. We're looking at the GDP report, which was very strong. We're looking at the Employment Cost Index, which showed no real inflation worries. We're looking at the
PCE inflation numbers, which weren't a real problem. We're looking at the fact that consumer spending went up strongly last month, and they'll say, it doesn't appear to us that the economy has really changed. So we were looking at under these circumstances at twenty five basis point cut, and I think that's what we get. And he'll say, so, that's
what we did. We'll wait and see on what we're going to do for December, to see what the spending and growth and inflation numbers are, and we get another employment report before the next FED meeting.
Okay, before the next FED meeting, we have an election. Forgive me for harping on this, but I'm going to throw a curveball at you. Mike We've heard from Donald Trump and Elon Musk about the idea of cutting government programs, cutting spending in the government if Trump does win. One thing that I haven't heard a lot about, though, is how cutting several trillion dollars from the budget might affect employment, given that the federal govern is such a big employer of Americans.
Well, it depends on how they do it.
That's what I was going to ask you.
And much of what happens in Washington in terms of the budget is sort of just moving pieces around. It doesn't really have an impact, probably doesn't mean that much.
I'll give you a caveat in just a second.
Interestingly enough, the Bureau Labor Statistics was going to cut back on the sample size for the Household Survey, the Unemployment Report survey, and in the Continuing Resolution, the government put more money back into it. So now they don't have to cut back, so they will in terms of the statistics for the economy.
That's good news.
Now, if you're cutting back on spending, are you cutting back on contracts for work done for the federal government or airplanes built or things like that that will be in the future. Right now, it probably doesn't have as much to do with it. If you did start cutting significantly,
then over time it would have an effect on jobs. Now, the big effect on jobs might be if Donald Trump is elected and he tries to reinstate Schedule F which changes a significant portion of the civil service into immediately fireable positions, and he immediately fires them, then you could lose thirty or fifty thousand employees from the government payrolls.
And that would have an immediate effect.
But we don't know that a he will do that, and b how that would be received. And obviously you know the federal unions would take that to court, et cetera.
All right, we're gonna have to leave it there.
Michael McKee international economics and policy correspondent for Bloomberg and is giving us an overview of the data, the big picture to understand how companies are hiring or not hiring in this environment. Let's bring in Martha Heller. She's founder in CEO of Heller Search and it's an executive search firm that specialized this is in leadership roles in technology. She joins us from Massachusetts. Martha, good to have you back on the program. There's no single category in the
BLS data that says tech workers. But we did see a decline of two thousand jobs and telecommunications in addition of about fourteen hundred jobs and information services and computing infrastructure providers in.
The month of October. What are you seeing on your end?
You know, on our end, we're seeing a lot of change happening in executive technology leadership positions.
And whenever that happens, there's a lot of hiring.
So you know, some companies are laying off technology people. But the overall story is a story about an investment in AI. And in order for us to recoup our tremendous investment that all of our companies are making in AI, ironically, we need people. We must hire people who can make all of our AI dreams come true. Now, so far, we're seeing some disappointing results from our AI investments. Microsoft
is reporting disappointing sales and pro Pilot. We're hearing this fun term called productivity leakage where we initially got some gains from AI, but now we seem to be losing them. And then finally, eighty percent of most AI projects are still in testing things. So if we are able to
get a return on our AI investment. We are promised lots of technology hiring in the future, but if we don't and some of our AI investments wind up not paying off at all, then we have a much larger hiring situation, a challenge on our hands because we're going to wind.
Up in a bust situation.
So I think there's hurricanes, there's elections, But to me, the big story in technology hiring is AI investment. The people we need to invest in to give us the return, and whether or not we're going to get that return.
To me, that's what's happening in technology.
I'm glad you brought up some of those technology companies because we did get earnings reports from a number from them as you know this week, including Meta and Microsoft, and of course they're still boosting spinning when it comes to artificial intelligence. So when you're looking toward when it comes to acquiring types of skills for AI, when you're talking with your clients, how does one acquire skills? What are those typical industries that you would go to for that?
So to get what's interesting is AI skills are strategic thinking, their processed expertise, their innovation, they are technical, they are development.
So there's a whole range of AI skills.
Or if you want to go work in high tech developing AI solutions, you are likely going to get most of your training on the job. What companies like Microsoft and Meta like to do is they like to hire the athletes. They're not necessarily worried about who's got the top PhD in computer science.
What they want to hire are people who.
Are innovative, they can think they can collaborate because AI is less about technology, ironically than it is about capabilities and efficiencies and processes and people. So it depends on the skills you can learn, you know, development languages in computer science programs, but it's really more about how does your company work and how can you use AI to do that better.
It's usually on the job train.
Remind everyone, Martha, where where in sort of the ecosystem the executives you find in place are geographically salary wise, because we're not talking you know, you're you're going after the folks who are making significant amount of money and the positions they have are kind of few and far between.
That's right.
So the population that we focus on our technology executives across all industries. So insurance in retail and airlines and what is happening in those companies. So those technology executives are starting to run their businesses more like soil companies, more like Microsoft, more like Meta. Because in order to make use of AI, we need the culture, we need the technologies, we need the talent that we have in
some of these high tech companies. So the challenge is, how do you a head of technology an insurance company find the AI skills that you need when you're competing with Microsoft.
That is the real challenge.
So our senior technology executives are really across every industry, but the talent that they need is actually not from their own industry.
It's from the high tech companies.
And especially when you're thinking about moving ahead and looking at how when you are acquiring the skills that you were talking about earlier. Speaking to us more broadly, just quickly, because we only have about a minute left when you're looking at the outlook as we head into twenty twenty five when it comes to these positions.
Sure, so the outlook is there is much more demand than there is supply. We are not training our people in AI skills. So I would say broadly for divided companies, still to still invest in as heavily an AI as they've done in twenty twenty four. We're going to see a upward pressure on companies to hire these people. So broadly, I think we're going to have a supply demand problem where we are going to need more tech skills than we currently have on the market.
That's really going to be a CEOs challenge going forward.
Martha, just ten seconds left. What's the meat of the conversation we have with you a month from now if you join us.
A meet of the conversation is now that the election is behind us and we know who our president is. The analysis paralysis that keeps people from making keeps companies from making real investment decisions, particularly in growth, will be behind us, and I predict that we are all going to be looking forward to a very busy first quarter with hiring.
Okay, so not a repeat of two thousand and when we didn't know for many weeks when the who the winner was of that electtion from Martha Heller, founder and CEO of Heller Search, the executive search firm.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern listen on Apple card play and then brought auto with a Bloomberg Business app or wants us live on YouTube.
The Apple shares down about one point six percent, not taking part in that relatively broad rally, the company sparking fresh concerns about revenue growth and lingering weakness in an intensely competitive China market. We got Mark German with us. He's a Bloomberg News Chief technology correspondent. He joins us from La Mark. We heard yesterday from Apple the company expects total sales in the current quarter will rise by a percentage in the low to middle single digits. Analysts
wanted to see seven percent. We also saw a decline in China revenue last quarter that fell short of estimates. Help us make sense of how weakness in China is linked to weakness and total sales.
When they said the guidance for the first quarter on the earnings call, I did a double take. I wasn't exactly sure that I heard it correctly. Low single digits is below expectations, especially all the hype that they're pushing for AI and this latest iPhone, all the new products they've rolled out that seemed really low, but that is the reality sometimes they guide under. But you know, they said last quarter it would be a five percent increase in revenue y earvery year, and this quarter ended up
being a six percent year of year increase. So they're pretty much lately at least on the money with their guidance. So yeah, it'll probably be in the in the you know, round five percent or less range for Q one in terms of how China plays into this. So China has skipped again, right for the fourth quarter. It was a year of a year decline, but that decline has improved. It's not as bad as it was. We were getting used to two three billion dollar a year year of
the year shortfalls. Right now we're in the half a billion dollar range, so you are seeing some improvement there. Apple is trying to imply to the street that the issues in China are not related to the iPhone, but everything that we've seen and heard indicates that the iPhone is probably not doing as well as Apple would want. In Greater China, you're seeing a lot of new competition from Shao Mii and Huawei. More importantly, you're seeing some
of these other smartphone makers trying new things. Right, I'm not saying they're selling well, I'm not saying that they're extraordinarily feasible, but at least they're trying new things, whereas Apple is sticking to the same formula, the same design, many of the same features that they've had for a number of years now. And I think that's why you're seeing a little bit of softness in China in addition to people wanting to buy homegrown products.
Mark When it comes to other big tech companies, obviously Microsoft and Meta is still facing sort of wary investors after reporting that rising in AI spending, but it seems like Apple's been a bit more cautious when it comes to spinning when it comes to AI. Where does it stand on this?
Yeah, I'm not sure that they've been cautious on spending on AI because they are trying to be conservative.
I think that's part of it.
I think the other component is there's not a ton that they need to be spending on AI right now because they just don't have the feature set that requires the big spending Microsoft, OpenAI, Google, Amazon, They're requiring a lot more spend than Apple and artificial intelligence because they have a lot more to offer.
Right That's one part of it.
The other part of it is, as opposed to all these other providers of AI technologies, Apple does a lot on device. Their large language model, for the most part, can do a lot on the phone itself. It doesn't require as much movement to the cloud as some of these other providers. So I think it's a mix of that, trying to be conservative, not having as much to offer,
not as much as server centric capabilities. And then the third thing, because they're actually able to do a lot on the phone itself, which is great from a privacy and actually a performing standpoint.
So it's a mixture there.
Hey, Mark, iPhone revenue coming in at forty six point two billion dollars. It beat estimates of forty five billion dollars. How do we know how well the iPhone's sixty is selling China?
Notwithstanding we wait until the end of January or early February when Apple announces its first quarter numbers. Don't forget a large portion or the majority portion of that forty six billion is going to be non iPhone sixteens. You know, the quarter is three months long, and you only had about a week and a half of sales of those latest iPhones, including pre orders as well from the prior
way to that in the fourth quarter window. So I think we need to wait until the first quarter results are presented for us to really have a strong idea on how the iPhone sixteen is doing. I don't think there's going to be a supercycle. What I'm seeing is that things are going to be about the same, if not a little bit better than the iPhone fifteen Pro. And I don't really think a lot of that has
to do with Apple Intelligence. I think consumers are seeing through the marketing engine that Apple is pushing right now for Apple Intelligence. I think a lot of it has to do with pent up demand. There's a lot of folks still on an iPhone ten, a iPhone eleven or twelve in earlier, and they need to get a new phone. It's not necessarily features driving phone sales.
At this point.
It's that people need a new phone every few years because, let's just be frank, the battery stops working properly, apps lose compatibility, and just overall things just stop working. And I think there's a lot of pent up demand and a lot of an upgrade cycle for new iPhones are driven by the fact that people just need a new phone, not because they want one necessarily, but because they need one. There are also these just awesome installment plans that many
of these companies are offering right now. All the carriers do it. Apple does it through retail, Apple does it through the Apple credit card with Goldman. You have these upgrade programs through trade in packages. So there are lots of reasons to get an iPhone that have nothing to
do with the new iPhone's functionality. In years when they actually present a major new design or a major new set of features that just sets you know, light lights that on fire, puts more on the engine there for consumers to want to upgrade, so they're getting those phones sold no matter why.
I'm glad you brought that up, Mark, that was something I was going to ask you, because it does appear that those iPhone sales for Apple were a positive surprise. So it does indicate that people with iPhones were that potentially were three to four years old, like myself, might be ready for an upgrade. I don't know about you, tim but what do we know about the timeline?
Right?
I think I'm going to hold off maybe potentially to next year, But what do we know, Mark? When it comes to the timeline of those AI features that people are really eager about when it comes to the phones.
So the first features, which are essentially worthless, they launched on Monday.
Earlier this week. There's quite a few people who are.
Still complaining on social media that they can't get past the wait list. These are features like rewriting messages on your behalf notification summaries. Those work about eighty percent of the time. The other twenty percent you can get some quite hilarious responses. The real stuff, the real Apple Intelligence, as I like to call it, that's launching in December. That's going to include integration with Chat GPT. I've been
using that on my Mac. It's terrific. You're getting like image playground.
Wait wait, wait, sorry, I want to cut in here. How are you using it on your Mac?
Right now?
Mark explain the functionality of it.
So Apple Intelligence is available on the iPhone, iPad, and Mac and on the map. When you get Apple Intelligence, you have a new Serie button on the top right of your display and you click it and you can type in a Serie query. But if you type something that Siri doesn't know, which is probably going to be most of the time you get routed to chat GPT, and basically you get an endless array of potential responses and things you can do Chat GPT. Everyone listening to
this and probably use it. It's awesome. And now it's integrated super deeply into the Apple ecosystem, or it will be in December when eighteen point two launches on the iPad and the iPhone fifteen point two launches from macals Saquoia. So I think the chat GPT integration is just terrific and I think people are really going to like.
That is the is the We talked yesterday with Ed Ludlow about the search functionality improving on chat GPT as a hit to Google. Ed actually has access to it because pays for chat GPT. Can you get access to it if you don't pay for it through Apple and Apple Ai, So.
You can integrate the paid chat GPT into your account on your Apple account, or you can add your free account, or you cannot sign in with your open Ai account period. So it's totally anonymous what you're doing in terms of the queries you're putting into chat GPT, the user interface being used right now, at least in this beta period is the non search chat GPT, but I would imagine
over time maybe they'll integrate that. But who knows Apple has a Google Search deal to protect, so maybe they won't accept that.
When it comes to some of those base effects that a lot of people like to blame, especially when you're thinking about big tech earnings, not just Apple but others, because there is such a high bar. Obviously in twenty twenty two, as you know, there's a beer market at US stocks, and obviously the earnings OUTLOK wasn't as strong. But once in Vidio had that blockbuster revenue forecast last May, obviously that kind of skyrocket the earnings growth for the
Magnificent seven. But as we go throughout the year, obviously the use of the base effects aren't quite as strong as a year of a year basis. So how much when you're talking with your sources, especially if they're traders and investors, kind of look past some of those types of issues when it comes to some of the growth numbers from a quarter and then a year year basis.
Yeah, I mean, certainly the AI story plays very deeply into the Apple stock price. I mean, I think some people won't believe believe this, but I think the Wall Street effect played a significant hand. Maybe not in the development of Apple's AI features or the reason for moving into artificial intelligence in a deeper way, but the way they're marketing it. I mean, they essentially lied that that the new iPhone was built for the ground up for
Apple Intelligence, right. The new iPhone essentially support AI the same way the prior iPhones did. They essentially were dishonest with the rollout timing for many of these features. They were dishonest about they're marketing. When these new phones went on sale, they marketed them for Apple Intelligence. But Apple Intelligence launched a month and a half after they went on sale. You know, you can make the argument that they're saying it was built for AI, so people knew
that they would support AI. But I don't think anyone's under the impression that Apple wasn't trying to imply that they were ready for AI when they simply weren't.
Now, I'm not going to criticize them for coming out a.
Month and a half after the new iPhones, right, But I do think that you can make a safe argument that Wall Street and the way that AI impacts stock price and the way AI gets people to invest in the company and have interest in the company, played a major hand, and then marketing the new phones this way.
Is that a departure mark from how they've marketed in the past.
I think it's a departure from let's say Steve Jobs with CEO of Apple, and Apple was several years behind in an extraordinarily core and key technology. I think he'd
be ripping the company to shreds over this, right. The good news is is that Tim Cook is perhaps not as volatile as Jobs may have been on these types of matters, and he is allowing this thing to roll out, and in six months from now there will probably be the perception that Apple is in the upper echelon of AI, obviously not the leader.
I do think it's going to take them.
Five years to become the world leader in AI if they ever reached that point. Obviously, the amount of money and resources they have the goals to become the number one player and AI. I think if they play their cards right with making acquisitions that could be helpful, there an investment that could be helpful there, they'll get there,
but it's going to take a while. The good news for everyone involved is that the arc of time is extraordinarily long, and if Apple becomes number one in five years from now, all these conversations, unfortunately, including the ones with me, will all.
Have been moved.
Mark.
Before we let you go, we got thirty seconds left to talk about pixel Mater.
What's going on with this acquisition?
Yeah, this is great.
Pixel Mater is just simply the best photo editing application you can.
Get across Apple devices.
If you're an Apple fan and you like photo editing, it is extraordinarily well integrated. In fact, some probably would argue that they had no idea that pixel Mater wasn't an Apple offering. These two companies have been circling each other, and it makes so much sense, and this was just.
A matter of time.
Anyone who's used pixel Mater, you feel right at home as an Apple device user.
So this is great.
Aperture was discontinued a decade ago. Now they're back in the photo editing business.
Bloomberg a News chief technology correspondent Mark German out there in La Mark, thank you.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
So, of course, ten millions of Americans can't afford, unfortunately, to buy a home or rent a suitable apartment, making housing of course a key and central issue for voters in the US presidential election coming up on next Tuesday. And the biggest reason home ownership is out of reach for many is there aren't nearly enough home for sales to balance out the market between buyers and seller, something
that's been exacerbated especially after the pandemic. But the election may still not have an immediate impact on the housing market in the short run, even with the Fed's latest rate cut, as mortgage rates still keep many home shoppers on the sidelines. So let's deep diver with Jenna Stoffer, global real estate advisor at Fossilby's International Realty, joining us from Key West, Florida. Thanks so much, Jennifer joining us. And I was just looking at the Freddie Mac data.
Of course we get weekly here. If you look at the thirty year fixed rate mortgage actually went higher about six point seven percent, and then the fifteen year, he
also rose to about six percent. Of course, even despite the fact that we did just see the FED cut rates by about fifty basis points back in September, so kind of set up the dynamic for us when you have the situation where we did see some of the mortgage rates come down for a little bit, but now they're starting to creep up higher and obviously keeping people on the sidelines here.
Absolutely. Unfortunately, these rates have gone higher, and I think there were a lot of perspective home buyers out there. They were hoping that these rates were going to go lower. I think that there were a lot of economists at the beginning of the year too, they predicted that rates were going to be much lower than where they are
right now, and unfortunately, this is where we're at. In fact, I really think that some buyers, perspective buyers out there, they need to kind of get used to the idea that I think rates are probably going to stay around this level. And you were just talking about how many people are struggling to get into the housing market, and this is what's going on in the housing market. We have an affordability and really an accessibility crisis, and there's so many people that want to get in. They're just
struggling to get into the most expensive housing market. We've really watched the fastest deterioration in housing affordability that we have seen in recent history. I think it would be really hard to go back and find three consecutive years where housing has to deteriorated this quickly. And there's just a lot of challenges that that people are facing, not just rates, but but the home prices, the elevated cost
of living. There's just so many factors at play that's making it really difficult for people to enter this housing market.
Jess, before she did real estate, Jenna was a broadcaster. She worked at a TV station in North Carolina. So there's hope for us.
There is there's hope for us. We can this life.
We have other options.
Later, that's right, you could join me selling real estate in Key West.
Well, well, you know, I got to ask you.
Obviously you're you're focused on this one geographic area, But I'm wondering how you watch real estate throughout the country, because that's one thing that I noticed these campaigns don't necessarily have a solution.
For real estate is local.
We know that and Just because there's a housing crisis in the country doesn't mean it can be solved in one place, or it can be solved by building in one place if that crisis doesn't exist in that single place. This is a really tough thing to do. And even though it's a folks of national politics, we know that this is much more a local issue. It involves zoning, It involves rule changes.
Absolutely. I think that zoning, what you're talking about, zoning reforms, this is one of the biggest things that I think has to take place. And of course that's going to start at a local level. It's going to be on a state level too, But I think that what has to happen on a local state, even on a federal level, there has to be collaboration. There are so many barriers that builders are really facing when we really talk about
that inventory crisis that we're in right now. We're short, according to some estimates, around four point five million homes. Some estimates that number is even much higher. And it took us years to get here. I mean, this has been a chronic, slow going crisis. You could take it all the way back to twenty ten. So because it took us years to get here. Of course, it was accelerated during the pandemic. It's going to take us years to get out of fear, but we have to start
taking steps. I think at the local level, you've got to start removing barriers. You talk with builders and there's so many upfront costs that they're having to pay before they can even break round. So this is something we really have to address if we want to tackle the supply issue.
When it comes to monetary policy, obviously, when you think about a barometer like the ten year treasure yield of what that means for barring costs, especially for mortgage rates as well, where do you think, especially because we've been in such an aggressive hiking cycle over the past few years, where would rates need to kind of neutralize at to really help more people step in and start either to refinance or step in to try to get borrowing to finance for a home.
Well, I think there needs to at least be a five. I think that that. In fact, I really think the magic number would be a four because what else we're really struggling with in the housing market right now is a lock in effect, and I don't know if we're going to get to that rate. I really predict that we're probably going to stay around this rate for a while. But because the lock and effect is so real. Look
at the mortgage holders right now. You have sixty percent of them they're holding onto rates that are below four percent. You have around twenty three percent of mortgage holders they're holding onto rates that are below three percent. Why are they incentivized to enter the most expensive housing market in history and let go of this rate that they might
never get again in their lifetime. So this is the problem that we face, and unfortunately, I just don't think we're going to get rates to this magic number that we really need to get it to to see the housing market really start moving again.
Regionally, what areas are most vulnerable? Obviously we're here in New York, so you know, me being a millennial, I still rent, but I know obviously my buddies in California have similar problems. But then what other areas beyond when you're looking at the coasts are vulnerable right now?
Well, I think there's a lot of areas that are vulnerable. Obviously there's some very expensive markets in California. You know, something that we are seeing happening with real estate being so localized. There are a lot of markets where you are seeing inventory start to pick up. And I do want to bring up some positive things with the housing market, because I feel like I've been a little negative and
there are some positive things happening. You are seeing inventory levels pick up, and in one of these areas where you're seeing inventory levels pick up is where I'm at here in Florida. Also Tech this is another area where you're seeing inventory levels pick up. And when you have these inventory levels pick up, what happens is you start happening a softening in home prices. So these are some
areas where you're seeing a softening in home prices. And then you have other areas I would say specifically in the Midwest, the Northeast. These areas really are the supply and demand just is so out of balance. So you're seeing these prices just continue to go up because there's such a lack of supply.
What happens to supply when we see demographic shift here, and what I'm talking about, to put it in another way, is when the boomers who aren't moving either move or die and this so called great wealth transfer begins, do we see a great unlocking of homes becoming available, or will supply still be lower than demand.
I think it's going to take time. I know they call it the silver tsunami, and I think that it's just going to take time. Sure, some homes will come on the market with the baby boomers, I mean they do want to downsize, but you do have some of these baby boomers that if they want to.
Not if they don't have a mortgage right now, and you know that's.
Right, yeah, yeah, because if they're holding onto that two or three right mortgage rate, why do they want to get rid of that right now? So sure, eventually, I mean they're going to have to move. People have to move, People need to move for a number of reasons. So it's just I think that with them coming on the market, it's just going to take time for us to get back to this healthy supply and demand balance.
I'm glad you brought that up because we had some earnings from d R Horden earlier this week. Some of their outlooks kind of disappointed investors. But when it came to homebuilder stocks, I mean a typical index, they actually touched a record high back in the middle of October. But I'm kind of wondering does this open the door for potentially more homebuilding, especially because this has continued to happen.
What do we seeing in that space for like first time kind of home buyers when it comes to starting homebuilding process.
Well, home building new home sales specifically, they have really been at the bright spot in the housing market because these builders are able to do some buydowns of rates. So I think with new home sells, this is really where people are migrating towards because they can get lower rates than they're getting in the existing home market. Also, I think something that people really want right now is that they're going to be entering the most expensive housing market.
They want the house ready to go. They don't want to be having to pay money for repairs or maintenance. So this is where new home seals. I mean, again, this is another big right spot because you have these buyers that are dealing with these high home prices. At least they know they can be moving into a brand new home and they're not going to have to be spending money down the line on a lot of maintenance costs.
How's the market in Florida where you are in Key.
West, So in Florida, what we're seeing here is we are seeing more in come to the market, so you are seeing some softening in the market. Absolutely in terms of single family homes. That's much different than condo sales. In fact, what's happening with condos is we're having a lot of changes that have come into place due to
the surf side collapse. There's new regulation talk. Yeah, they're being faced with really high assessments, and for some of these condos owners, these assessments are just are too high. You have a lot of retirees that are on fixed incomes, so you're seeing more condos come onto the market. But in terms of single family homes, yeah, we are seeing a pickup, so we're seeing a softening. But look, Florida has really led the nation in terms of population growth.
We had such a boom down here, so for us to have a little bit of a softening, it's not necessarily a horrible thing.
This certainly the surf side tragedy an issue because of those assessments and regulations, but also what about insurance companies and the difficulty in getting insurance or the expense of getting insurance due to flooding.
This is one of the big challenges that Florida faces is insurance. I mean, you talk with people and they are fed up with high insurance costs down here. So I know we do have some reforms that are in place, but it's going to take time for us to really get a handle on the insurance problem. But hey, this is a challenge that we face without a doubt here in Florida. Are these high insurance costs.
Jenna, thanks so much for joining us. Do appreciate it?
No, I mean great stuff hearing from her, but especially something I was thinking about as well, Tim when it came to the concessions in kind of the depths of COVID. When it came to people that were looking for home buying, there were so many different things people could try to get. But looking at now, it's obviously kind of a different process here. So for people like myself who eventually want to be a home buyer, eventually, right is right how that all plays out, But we'll wait and see.
We will that.
We were joined by Jenna Stafford, global real estate advisor over at Southeby's International Real So she was joining us from Key West, Florida.
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Bloomberg Radio, Jess Mitton and Tim Stenovik here in the Bloomberg Interactive Brokers studio here in New York, with less than twenty minutes to go before the closing bell on this Friday, S and P five hundred up just marginally five ten percent off a little bit of the highs here, still on pace for a weekly decline of more than one percent, but still up, of course twenty percent for
the year. But as the calendar did just flip to November next week, there's a barrage of events as we know, with the US presidential election of course, also the Federal Reserve meeting next Thursday, a flurry of corporate or and eventually we'll also have at thirteen f deadline. So let's sus us more on today's trade with Carol's Life, chief investment officer at Bibo Family Office from Minneapolis. Thanks so
much for joining us. Carol always great getting your perspective on all things markets, and especially as we head into next week's pivotal week. How are you positioning and how are you advising clients to position when you're going into such a contentious neck and neck race, And is the more sure bet looking maybe beyond that and instead to the Federal Reserve monetary policy.
The more short bet is looking even beyond that and taking a deep breath and keeping one's head about one because this week had no lack of news either, and so staying focused on that long term is really important. And you know, we actually our stock at trade, if you will, is helping clients build durable portfolios, understanding what their goals are and looking through this and it's really important to remember to pull through the underlying fundamentals. And
there's a lot of themes. There was a lot of themes you could pull out of the earnings of this week in the last few weeks in terms of the resiliency of the consumer, the big important secular changes we have going on in this economy, and a lot of that, and so building portfolios that have a foot in some fixed income where you're getting paid to sit on yield, but leaning into that growth trend that we do see for a longer term, and just.
Trying to trying to keep an even keel.
Amidst all of the volatility on a day to day basis is our key objective.
Right and looking at the volatility even the vis obviously Wall Street's chief ear gauge rising back above twenty again
this week. When you're looking more on a sector basis, specifically on the equity side, which sectors in particular do you like over the long term, say over the next six to twelve months, versus those that you're shying away from, And a lot of it, I'm sure is difficult because when it comes to policy proposals, I know that traders really like gridlock because that'll keep certain things in check when it comes to healthcare and tech revelation and things like that.
You know, on the one hand, it is interesting because looking at those policies, it will be impactful on certain sectors. But whatever the incoming Congress is, we need them to work.
I know.
The theory is Wall Street enjoys a gridlock to Congress, but there's a lot of stuff that has to get passed and dealt with in the next one to two years. You've got the expiration of the tech the earlier tax cuts in twenty twenty five. You've got the renegotiation of the USMCA and trade policy in twenty twenty six.
So there will be a lot to do post election.
But as for the industries that we like, we really think that this industrial the reindustrialization theme that bringing key industries back here, that horse is long out of the proverbial barn, and no matter who's in power at sixteen hundred Pennsylvania Avenue next week, those trends are going to continue.
When you look at part of what the markets have been grappling with this week in terms of not appreciating that we're not seeing margin improvement right away from all the AI spend, but that data center spend is being done by the private sector. The data center use cases are being built by the private sector, so that the industrial theme is very impactful, and those data centers need to be hooked to a grid, and the grid isn't substantial enough right now to be able to support that,
so there's a lot of knock on effects there. In terms of reindustrialization, you've seen some iffy economic numbers out of manufacturing and construction but a lot of that is because it's waiting to see what happens in the next couple of weeks as we settle out the election, and we think there's a lot of pent up demand for those industrial sectors and the playout, and there's a variety of other industries we like as well.
Carol, can you help me help me understand that, because this is something I don't understand. We know it's either going to be Trump or Harris, like that much is clear. So why is there this holdout as to investment or what people are buying or making decisions, because we know it's one of two choices, right.
But I think one of the things that's really important to remember is there's this nuance between both parties. Right now are on the campaign trail making all sorts of promises about tax cuts. Well, tax policy isn't in the purview of the of the White House. It's the purview of Congress. So you've got a whole bunch of elections to resolve before you can move tax policy. On the
other hand, tariffs can be moved by presidential decrees. So depending on which outcome in the White House is whether it's a Harris or Trump, there's very different tear iff policy that could impact these businesses right away. You've got some businesses already positioning presuming like the rest of the market has in the last couple of weeks, you know, discounting if you will, of red wave and assuming that
we are going to see TARRAF. So you've got companies anecdotally saying that they're already prepping to raise prices in terms of as because it's a business cost and a consumer costs bringing those goods in. So everyone's looking at things getting prepped to do it. You've also got companies,
you know. The parallel issue is the second big event of next week, the FED meeting, and the fact that you've got companies waiting to watch FED policy as they bring rates down, because why do m and A and fund m and A if the Fed's going to bring rates down again in the next at the next meeting. And so some of that too, just going into your end and the sheer necessity to close off this year
and prep for next year. It's pretty typical from a calendar standpoint to have softer activity going into your end.
So with the FED decision coming up next Thursday, what's your expectation from the decision, and what do you expect to hear from fetch your pal.
Do you expect to hear the chairman? We expect them to cut by a quarter basis.
Point next week.
And one of the things is is it's important to remember that the policy rate right now is substant is restrictive aside from we've had good economic growth, but it's restrictive relative to where the rate of inflation is. So the Fed's got some room to start stepping it towards that more neutral rate of inflation without it being a testament to either the economy is good or the economy
is bad, just to get them more aligned. And businesses have told the Fed repeatedly, if you parse through the last couple of Beige books, they've told the Fed, look, when you start, lay out a very clear path for us in terms of what that process is going to be.
Don't start stop, start stop.
Because that makes that business planning even more difficult. Just give us some sort of vision. So we do expect in the or in the press conference that happens after that that Chairman Pow will be very careful as he normally is laying out that path and giving us some clear site. Whether or not they cut in December is an open question, but six to twelve months from now, that path and that trajectory towards a more neutral rate should be clearer.
Carol, thanks so much for joining us. That's carolsh Life, chief investment Officer over at BEMO Family Office. She joins us from Minneapolis.
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