Mark Hamrick, Washington Bureau Chief, Senior Economic Analyst, Bankrate.com
Today's key economic indicators
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Mark Hamrick, Washington Bureau Chief, Senior Economic Analyst, Bankrate.com and Senior Director with parent Red Ventures
Mark is a career journalist and senior economic analyst with Bankrate.com, a Red Ventures company, where he is also Senior Director. His focus is on personal finance, business, data creation, collection and analysis, economics and politics. Mark has hundreds of media hits/appearances during live on-air interviews and for print each year providing commentary, color and insight for media outlets including newspapers, online, radio and television. Creating, analyzing and explaining polls and surveys of experts and the public related to the economy, politics and personal finances.
Mark covers everything you need to know about the state of the economy today in an insightful and data rich podcast. You'll love it.
What You're Going to Learn
- Federal reserve mandates and fighting inflation
- How higher interest rates will impact the economy
- Will inflation peak in 2022?
- The balance between inflation and employment
- Post pandemic economy and the future of work
and, as always, a LOT more!
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Federal reserve mandates and fighting inflation
Adam Gower: You've seen a lot of cycles. You saw the savings and loan crashes. You saw the dot com. You saw the 2007. There have been some big cycles in your time and one of the classic, classic, most wonderful expressions that we hear in real estate, the more you hear it, the more you know that it's time to start tightening your seat belts. No. This time is different.
Mark Hamrick: Yeah.
Adam Gower: So, my question is - you know, you've seen the 70's, 80's, 90's and the 2000's. Is this time - is it different? Like, what's different about what's going on in the world today, in comparison to what you've seen, in a way that we can maybe understand what's headed towards us?
Mark Hamrick: I've been going to Federal Reserve news conferences since the news conferences began, which in the in the sort of historic timelines, not that long. They began in 2011, and that was under Bernanke, and then we had Yellen and now we have Powell of course. And the reason why I just want to dial in on that specifically is because the Federal Reserve, as we all know, has a dual mandate. In a way, it has a tertiary mandate as well, or a third part, which is financial stability. But the main two parts of that would be scale, which is never in perfect balance - is maximum employment and stable prices. And, we came out of the last expansion with an unemployment rate that went as low as 3.5%, and the Fed, year after year after year, had failed to achieve its objective or did not see the objective reached of essentially 2% annualized inflation. And so, I'm of the belief that there was a mindset that had essentially taken hold among most members of the, let's just say, the Federal Reserve Board or the Federal Open Market Committee that truly believed that inflation had become an antiquated threat. In other words, it was not going to happen again. And of course, the constellation and convergence of the things that created the current circumstances could legitimately be argued to have been totally unforeseen. Right? I mean, who had it on their Bingo card that there'd be a pandemic, that would cause supply chain disruptions, that were followed by an invasion of Ukraine, which is a major supplier in concert with Russia, of such things as metals and wheat.
Mark Hamrick: Who had all those things on their Bingo card and then as we speak, we're probably bracing for 8% plus year-over-year annualized inflation at the consumer level. So, every second that we breathe, thank goodness, we'll be experiencing something that is different. But, there are always the notions that history may not repeat itself, but it very does often rhyme. And so, what rhymes with the past now is that it was OPEC that helped to generate historically high inflation many years ago, and now it's OPEC plus. It's not just the so called Arab oil cartel, ann OPEC plus includes Russia. But, it could well be that essentially, limited supply of crude, etc., can legitimately be cited as one of the vectors or triggers for this next round, or the latest round of inflation. So, I would say that we should be mindful of history. We should try to be as aware of history as we can be. But to go to the earlier point about the Federal Reserve, reporters have asked Chairman Powell, essentially, did you take your eye off the ball? Was there too much stimulus in the economy? Which occurs at both the elected official level, you know, presidents and and members of Congress, as well as the monetary piece, which is central banks.
Mark Hamrick: And his answer to that is, let's let the historians judge that. But I think that if somebody gave them a do-over, I think they would have reduced asset purchases much earlier because they just ended those asset purchases in total, here in the month of March of 2022, and they've only essentially pulled the trigger once on the Federal Funds rate hiking cycle. And we don't have a legitimate way of knowing how far they get up on that staircase, but it's a good bet right now that that they're going to be stepping up quite a bit. And so, had they been more responsive or more aggressive in their tightening of monetary policy earlier, it's possible that we wouldn't have experienced this outsized inflation. Of course, the other part is, just to wrap that up, the Federal Reserve doesn't have a tool in its toolbox to hire tens of thousands of truck drivers or individuals to unload the containers that are on ships not too far from where you're seated, off the West Coast. Doesn't have the tools to pump more crude oil or even to resolve those supply chain disruptions that are occurring across Russia and Ukraine and certainly can't resolve the fear that exists out there that's also informing financial markets about the concern that this could get worse before it gets better with respect to access to supplies.
How higher interest rates will impact the economy
Adam Gower: I remember, I was first in the States in the 1980s, early 80's and it was - I remember mortgage rates at 16%.
Mark Hamrick: Yes.
Adam Gower: You got 12% on deposits at the bank. It was a different era altogether. And I'm not saying that's where we're headed, but with the tension that people are sensing, certainly in the market about inflation and the anticipation of some fairly steep interest rate hikes, it's clearly anything 200 basis points and up, really - this is significant. You know, in the early 80's, it would mean nothing. It was like a blip. But we're talking about doubling rates at the moment. Are you seeing, from your surveys and even from anecdotally or from your research, are you sending any indications of how consumers are reacting in terms of their borrowing or their finances in general?
Mark Hamrick: Oh, absolutely. Whether it's a recent survey that we've done of consumers or essentially individuals or anecdotally, it's obviously having an impact and it weighs most heavily on the consumer psyche. So, one thing I've been thinking about in recent days is with gasoline prices as high as they are, and that tends to be something that people complain about first, when that occurs is like.
Adam Gower: Gasoline. Gasoline prices.
Mark Hamrick: Yeah. Yeah. The price of gas.
Adam Gower: I'm actually, as you know, I'm in L.A. I've seen $7 gas.
Mark Hamrick: Oh, I know. Yeah. Right in Beverly Hills there.
Adam Gower: It's crazy. It's $7.
Mark Hamrick: I didn't know you could have full service gasoline stations, but I know they still exist, not too far from where you are. But, you know, we're talking about buying something that nobody really wants to have to buy and when they do purchase it, it ends up essentially going up in the equivalent, or the actual going up in smoke. And so, coming into this, if you want to call it a current crisis, the good news is that American households and their balance sheets have been in the best shape that they've been in quite some time. In part because of all the things that were done to keep them whole. Whether it's something like mortgage forbearance or the child tax credit that expired as of the end of last year. And so, American's savings have been, I would say, elevated, but we could quickly see that being drawn down because you're having to pay so much for so many different things. And obviously, those at the lower end of the wage, and well, spectrums are very much at risk. But those in the middle class are very much at risk as well. So, it's going to be key to watch things like actual spending, retail sales in the coming months. And, I would expect that at least for the next two months, measures of inflation are truly going to be stunning, to say the least.
Adam Gower: Do you really? Do you think inflation's going to - we're going to see it spiking further?
Mark Hamrick: Yeah, I mean we have to because the Consumer Price Index was most recently put at a year-over-year increase of 7.9%, which was essentially for the month of February. And since then, we've only seen these prices go higher. So, that doesn't mean that that has to be sustained over a long period of time but it's making - if it is not sustained, if we actually have some pullback in inflation or retracement of those numbers, it's going to make for quite the dramatic closing act.
Will inflation peak in 2022?
Adam Gower: So we're talking about kind of a peaking and then a sudden drop off.
Mark Hamrick: If - yeah.
Adam Gower: Implications of that, if that's why? This is actually transitory.
Mark Hamrick: Yeah, well, I mean, everything's transitory, right? I mean, you know, 90 plus percent of all humans that have been alive are no longer. But, first of all, I mean, you're going to - for it to persist for a very long time, assuming that you accept the notion that it hasn't already. You would have to have a continuing mismatch of demand and supply. Right? And, we've seen it time and time again. We just don't know exactly how long the cycle takes for those things to resolve themselves. Right? So, we presume that Shanghai, et cetera, will not be on lockdown forever. We presume that the lack of availability of semiconductors will not persist forever. We presume that the escalation in home prices can't continue on an annual basis the way that has been occurring simply because you can, you know, if you're having double digit percentage increases year after year, at some point there's a disconnect between the ability for home buyers to pay those prices and what the prices actually are. And the same goes for automobiles. What the used and new car prices having risen in ways that I've never seen before and would have never been able to forecast.
Mark Hamrick: So I just think, over time those things do have to align and it's not going to happen all at once. But in the meantime, Russia invaded Ukraine and that has had immense implications on all kinds of prices. Everything from nickel to palladium, used to make catalytic converters, to excuse our use of fossil fuels and automobiles, as well as obviously everything we eat and and the gasoline that creates that pollution. So, you know, I would say, let's see what happens with March and April. It's probably going to be ugly with the measures of inflation and then we'll watch the producer price index as well, because obviously that's the wholesale gauge. And if we begin to see that just kind of simmer a little bit, maybe come off full boil, maybe then we'll get at least some some better readings on things at the consumer level or the other measures of inflation. And obviously, once you get into the second half of the year, you're also going to have more forgiving year-over-year comparisons. And that may, you know, again, take some of the tension out of that.
The balance between inflation and employment
Adam Gower: You actually dovetail straight to my next question.
Mark Hamrick: Yeah, yeah.
Adam Gower: Consumer sentiment. People are pessimistic at the moment.
Mark Hamrick: Oh, yes, yeah. Yeah. And it's quite remarkable because if you go back to that balance between employment and inflation, essentially, despite the fact that we talked about the great resignation or the great migration, which is the movement of workers, people are looking past all that in terms of what we're seeing in the survey data. In other words, they are not excusing inflation because of a strong job market. They're saying, this inflation is real and you can kind of understand that from the vantage point of - we've checked the full employment or nearly full employment box off. People are going to continue to strive for improvement in their employment where they're inclined to do that, including with wage increases. But the sort of problem at hand is, you know, what you just expressed, you know, expressing surprise and shock at some of the things that you see out there. You know, I've had those experiences myself where I saw how much gasoline costs and I sort of murmur to myself about that. We live in the state of Maryland. There was a time, over the summer or spring when the price of crab meat just totally spiked. And I was like, I took it off the off the menu as the cook and bottle washer around here. Like, we're not doing crab cakes. I'm not doing.
Adam Gower: You went back to canned beans for dinner every night.
Mark Hamrick: Well, you know, I've done it before. I can do it again.
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Post pandemic economy and the future of work
Mark Hamrick: We haven't seen a collapse in essentially the consumer response in the sense of what they're buying. But as you know, being dialed into real estate, with 30-year fixed rate mortgages having popped above 5% in recent days, those in the residential real estate business are quite concerned that they may - we may see even a double digit decline in sales at some point down the road.
Adam Gower: Interesting. It is, actually. So this was actually my question. So, consumer sentiment - negative.
Mark Hamrick: Yes.
Adam Gower: People are physically migrating. Right? It's not just they're looking. They're quitting jobs and moving physically. So you get this sense of incredible motion, right? Physically in the economy. Do you think people are moving so fast and trying to change stuff and resettle before the music stops? Is that the sentiment you think that's in the market, or?
Mark Hamrick: Oh, I'm sure there are some but what my colleague Greg McBride, who's been with Bankrate much longer than I have, and is sort of our Tom Brady of Bankrate, if you will - came up with a phrase that I love, and that is: People don't get married just because wedding dresses go on sale. Right? Or for sale, in other words, marked down. And so, you know, there are going to be people that just need to live their lives no matter what and I think about my many younger colleagues and friends who, absolutely moved at some point during the pandemic, whether it was an apartment or picked up from the New York City area and went somewhere else because it felt claustrophobic and dangerous, you know, being in that population center. But the other part is, as an economic judgment, right? In other words, let's say someone is happy with the employment they have and they have the opportunity to work remote and they also seize upon the opportunity to move to the Columbus, Ohio or Tulsa, Oklahoma, kind of community where - might be less traffic, sort of less hassle, for lack of a better way of putting it, and a much better entry point for home purchase. So, I think that's one of the marvelous things about what's happened, right? I mean, we didn't wish a pandemic upon ourselves by any stretch of the imagination, but we've learned to use tools, like we are right now, that we didn't know we had available.
Mark Hamrick: Certainly, if it had been 911, and we had to do this, we couldn't have done what we've done. And there is this awareness - by the way, on the part of agile and I would say aware employers and enterprises that, if they can, they have to acknowledge that there's no going back to the way things were before. And, much the same as those who survived through the Great Depression, will have had their lives permanently changed by this experience. I'm speaking about the pandemic. So, you know, there was massive distrust of banks because banks were failing all over the place and that brought a lot of reform, including the protection of saver's bank balances, as well as other changes under FDR, et cetera. And, I don't think we'll have the regulatory changes in the environment, but essentially these changes are structural that are occurring, right? Because, people are recognizing, well, if you don't allow me to work from home, I'll find somebody who does. And I just had this experience in the last week where I went to my doctor's office for a regular checkup. I won't say who the doctor is because I don't want to call out the staffer, who was, you know, a very professional young woman and all that and I'm, you know, sort of a curious person by nature.
Mark Hamrick: And I said, How do you like what you're doing and how long have you been doing it? And she was probably in her twenties and she said, I love my work, but I want to work from remote from now on. She was a technician in the doctor's office and I thought, there you go. And so, those people who have to work in public or in public-facing jobs, I think have a sense that there's a trade off from that, unless they just absolutely love it. And if they have to make that trade off, then they're going to say, okay, I know I can't bring dishes to the table from the kitchen in this restaurant, from my home, but I would like you to pay me or give me more flexible hours. And so, I think with all that we've been pained by the pandemic, whether it's the loss of life or sacrifice or all those things, or just the sense of, you know, lives are at risk - stress. We've been able to have a remarkable amount of innovation and those innovations are going to foster, and have, fostered great productivity improvements, learning, higher awareness of the need to be attentive to mental health and enterprises have to be attentive to those things. Employers have to be attentive to those things. So, these are all changes which could have never occurred had it not been for this.
Adam Gower: What's interesting to say "never occurred". My sense of it is that, it's just accelerated existing trends, basically. I mean, it would have happened, but it would have taken longer. This is just kind of, whipped it up and forced people to work remotely. And suddenly you realize, well, what the heck. Like, I might not be commuting anymore.
Mark Hamrick: Yeah, no, absolutely. But I mean, you know, some of the more conservative employers out in the world, obviously, it's not a political statement. I'm talking about their way of approaching the work, have now recognized that, you've got to sort of relax and trust people to the degree that you can do that. And you can measure their performance and that's appropriate and more appropriate in some settings than others. But, you know, we don't have a highly unionized workforce in this country and it may be true that that ship has sailed, but there's other ways that workers can take control or seize upon opportunity and power and they're doing that. And obviously, we see the, sort of, one-offs with Starbucks or the attempts to unionize at Amazon, apparently so far unsuccessfully. But workers have other ways of trying to drive the process.
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