September 12, 2025 • 39 mins
Mike Armstrong and Paul Lane discuss firm inflation and soft jobs data pull the Fed in opposing directions. Economists see Fed rate cut next week and at least one more in 2025. Mortgage rates are at an 11-month low. Will that save this housing market? Labor hoarding looks close to painful end.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Paul Lane.
Speaker 2 (01:10):
Happy Friday, and welcome back to the Financial Exchange. It's Mike,
Paul and Tucker with you on a Friday. After a
big inflation report Thursday. But frankly, all of this news
this week getting buried given the murder of Charlie Kirk.
There's a press briefing going on as we speak at
the moment, it looks like in Salt Lake City on
that subject. But to that end, I think, in part
(01:34):
because of that, any of the financial news that has
come out this week, Paul has not really been covered
by the press. And I was speaking with Mac Ganion
this morning out of Portland about this subject, which is
for good reason. This has not been the most important
thing that has mattered. And yet we have markets sitting
here again at all time his The Dow rallied above
forty six thousand for the first time ever yesterday, and
(01:58):
we have a Federal Reserve meeting coming just next week,
if I'm not mistaken, yes next week becoming the Federal
Reserve meeting. So a lot to cover here in the
world of finance, markets and the economy, and we'll be
getting right to it. But I think we start off
with the recap yesterday. Again, if you did not see
it yesterday, we got an inflation reading that was not
(02:22):
extraordinarily bad. It was elevated, but not elevated enough to
really reverse any of the thinking on the Fed's next moves.
We also got a weekly jobless claims number that came
in hotter than expected, meaning more people leaving those jobs,
probably involuntarily. And again, the way that we summarize those
(02:45):
from yesterday, Paul was both of these in and of themselves,
for one reading, are not terribly concerning, but could represent
a new trend line that is worth keeping an eye on. Nonetheless,
a lot of this bad news for the economy has
meant good news for markets, and some of that's logical,
some of it's not. But nonetheless, I think all of
(03:09):
the data this week either solidified the perspective that the
FED should be cutting rates or at least did not
thoroughly negate that perspective that, yeah, the FED should be
moving forward with rate cuts at this stage, and so
all expectations are that we are ago with at least
a twenty five basis point cut when we meet with
(03:29):
the FED and their press conference next week.
Speaker 3 (03:31):
Yeah, I think the biggest subject this week is really
where the Fed sits at this point. We've talked about
on the show a lot. They have two primary responsibilities,
which is price stability, that's inflation, and then the labor market.
And what's so interesting about this week where the Federal
Reserve is positioned, is that it is very clear that
there is certainly a weakening in the labor market. You
(03:52):
could argue how severe that it is, but it would
be hard to argue that we're not seeing at least
a trend of the labor marketing over the course of
the last six to twelve months or so.
Speaker 2 (04:03):
Meanwhile, you let's talk about that for a minute, because
I don't know that everybody is experiencing that. I think
if you are listening here in the Boston area, you
might be understanding that quite a bit because unemployment rate
in the Massachusetts it is like the tenth worst in
the state and has changed pretty dramatically since the beginning
of the year. But if you're in New Hampshire, or
if you're in the Midwest right now and listening, you
(04:24):
might not be feeling that week. Labor market. What are
the indications that you're using and what did we see?
They're big revisions this week for example, about a weakening
labor mind.
Speaker 3 (04:33):
Yeah, so the unemployment rates up to four point three
percent we saw from March of twenty twenty five through
March of twenty twenty four, they went back and revised down.
Nine hundred and eleven thousand jobs were taken away in
terms of growth over that period of time. And then
from a sector perspective, if you look at the more
recent months data, we're now averaging in around with that revision,
(04:54):
it's somewhere around seventy four thousand. If you look back
at the span of the last twelve to eighteen months,
from a sector perspective, on the white collar jobs, those
service business services kind of positions, you're seeing a lot
less hiring in those areas. Really, what's only been propping
up employment growth in general has been healthcare services. That
has been really the main sector where we've seen growth.
(05:15):
But otherwise as we're getting old, yeah, there's a lot
of healthcare spending, which we'll talk about later in the
show today because healthcare costs don't seem to want to
go down. But that aside just a labor market in
general that has been weaker because of those intericators that
we're seeing. It's not a tremendous amount of layoffs or
firings that we're seeing just yet, but certainly the job
(05:36):
growth has slow. There's no way you can argue that.
Speaker 2 (05:38):
Yeah, that piece is true. The complex. Yeah, to get
to your point here, Paul, it's really unclear how many
jobs we need to create on a monthly basis in
order to keep the unemployment rate low. But what is
fairly clear is that if we only create twenty to
fifty thousand jobs per month, whether the unemployment rate goes
(06:01):
up or not, it's going to be tough to see
economic growth. Yeah, I think that's where I land is. Yeah,
unemployment rate could stay down here in the four point
three percent range, but if we keep creating jobs at
such a slow pace, then consumer spending won't increase. People
won't be able to move from job to job and
see those wage increases, and so we're going to be
kind of in a languishing point when it comes to
(06:22):
the labor market, regardless of that unemployment.
Speaker 3 (06:25):
So that's one side of the equation, And what makes
it more fascinating this week is that we have the
inflationary picture, which you just mentioned, that is trending in
the other direction, where inflation has been ticking up from
the low that it reached back in April. On a
year over year basis, it was sitting at two point
three percent. We now just had a report that came
out at two point nine percent. Obviously the Fed's target
is two percent. That has been a huge concern this year,
(06:47):
and probably what we've spent more time focusing on this
year from our show and other news publications is concerns
about tariffs leading to inflationary pressure. And really what the
FED has come out and committed to is there Our
focus is now on the labor market. This inflationary report
was not so bad that that would cause a shift
(07:09):
in plan here. So really what we're going to see
from this rate cup, very likely coming next Wednesday, is
a twenty five basis point cut and a Fed that
is more focused on the employment market. And what is
puzzling to me a little bit which we can get into,
is the stock market rallied pretty significantly off of the
news yesterday on that inflation report, which I wouldn't have
(07:30):
rated as a tremendous report. I wouldn't say it was disastrous,
but because of that premise of lower rates, which can
impact asset values positively. We had a market rally even
against a backdrop that I would say is kind of
mixed at the moment.
Speaker 2 (07:44):
Yeah, it is. But here's where I always land when
we're talking about economic data and how it's going to
affect the FED. And what makes it really really difficult
to take take a market's perspective on all of this
is you have to remove yourself from what I would
do in this scenario and put yourself in the role
(08:05):
of J. Powell and those other eleven voting members of
the FED and say, Okay, I might view things this way,
but what would J. Powell and what would the Federal
Reserve Board and Committee be doing in this case? And
all evidence points to a FED that over the last
five years has been far more interested in what's happening
(08:27):
in the labor market and concerned about how they can
improve that labor market story than what is happening in
the inflation side of things. We saw it in twenty
twenty two when they were very late to the game,
and I see no compelling evidence why we wouldn't see
it again this time. So let's take a quick break
here when we do come back. I want to speak
a little bit more about that inflation report. What were
(08:50):
the bad items, what were the things that we're really
driving up prices? And why might the Fed be willing
to look through all of that for a lower interest
rate environment. That's next here on the Financial Exchange.
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Speaker 2 (10:12):
So, Paul, we're talking about the labor market and inflation.
We're talking about it because that's all we talk about
on the financial Exchange. I'm joking, but we do. We
do have a Federal Reserve meeting early next week, and
markets seem to be anticipating a rate cut. And I
don't mean seem to be. They are anticipating a rate cut.
Speaker 3 (10:30):
Question is how big really? I mean, well, it's pretty
clear it'll be the quarterback.
Speaker 2 (10:34):
It seems to be. Yeah. There is currently, according to
Chicago Mercantile Exchange, where you can look at prediction markets
on interest rate cuts or hikes, there is a ninety
two point four percent likelihood of a quarter percentage point cut.
There's a seven and a half percent chance of a
fifty basis point cut. So the reason why I think
(10:54):
quarter is the most likely scenario is because of these
underlying inflation concerns. But I gotta say I think that
the Fed will be willing to look through them a
little bit. The Journal has a piece today on twelve
month price changes from where they were a year ago.
These are always interesting to look at. Coffee top the
(11:15):
list here in terms of August changes, up twenty one
percent from last year.
Speaker 3 (11:19):
Almost sput out my coffee when I read that sucks.
Speaker 2 (11:23):
Auto repair up fifteen percent. That's likely again tariff related,
as is coffee. By the way, this stuff comes from
Vietnam and Brazil, both of which are facing double digit
percentage rates on tariffs. We don't grow that here in
the United States. Ground beef up thirteen percent, not really
terif related, apples up ten percent, bananas up six point six,
(11:43):
used vehicles up six, tools in hardware up nearly six,
oranges up five. There's a lot of other price increases
in here. Two furniture, paper products, a bunch of other
food categories. But a lot of this stuff is seeing
some upticks. Others are really not. Women's apparel is down
in pricing, and I can't really explain that, to be
(12:04):
quite honest, which is why I don't think you actually
want to focus on each of these individual categories. But
if I am the FED and I'm taking a look
at yesterday's inflation report, which again, if you missed it,
prices were up two point nine percent year over year
four tenths of a percent for the month. When you
strip out the food and energy impact, prices were up
even more year over year because generally energy prices have
(12:27):
been coming down of the course of the last year.
Stripping those pieces out, prices are up three point one
percent and three tenths of a percent for the month.
These are underlying trends that are pretty high. But if
I'm looking at this report, I'm looking at it and
I'm saying, Okay, we've got services prices that are on
the move. Yes, that is a concern, but frankly, the
pace at which services are going up is right around
(12:49):
what's normal. What is changing here is that goods prices
are moving up right now. If I'm them, I'm blaming
this on tariffs. If I'm the Fed, I'm blaming If
I'm the Federal Reserve, if I'm J. Powell, I'm blaming
these price increases on tariffs, because honestly, look through the list,
most of those big price upticks could be blamed on tariffs.
(13:12):
They could also be you know, changes to farming because
of immigration and other factors. But if I'm the FED,
I'm probably not banking on that. I'm thinking this is
because of tariffs, and if I really care about what
things look like a few years from now, because that's
what my policy affects. I don't really care about the
tariff impact. Why it's going to drive up prices once
(13:36):
and then you know a year from now. If I'm
the FED, I don't exactly expect coffee prices to be
up another twenty one percent. We've already built in that
tariff effect. And if anything, the year over year comps
should look better. The year over year comps should look better.
You could have more tariff negotiations, maybe Brazil is not
paying fifty percent tariffs or all of these different things. Heck,
it's with the Supreme Court right now. You don't even
(13:58):
know if it's going to be overned entirely. So I
think the more and more I've considered all of this,
am I concerned about underlying inflation and what it will
look like a few years from now? Yes? I am.
I think it could be an overlooked variable that is
not being paid enough attention to. But if I'm putting
myself in J. Powell's shoes and the FED shoes. I
(14:20):
am embarking on a rate cutting cycle that probably lasts
more than one meeting. I do think with the trend
that you're seeing in employment right now, all else equal,
you're cutting rates by a little bit at this meeting,
and you are indicating that you're going to go further
at the next several.
Speaker 3 (14:35):
That makes sense. You're throwing all your resources at employment.
I can see the logic behind the decision to sort
of put inflation on the back burner for the moment
and recognize that the labor market is a more near
term threat for the economy. But I don't love the
idea of shrugging off inflation. But I can get the logic.
Speaker 2 (14:56):
Yeah, I mean they were wrong to shrug it off
three years ago. The piece that gives me real pause
is they completely misread everything three years ago when it
came to inflation, and they are basically if they just
you know again, if you buy the argument that I
just made, then you're buying the transitory argument once again, right,
And that word is taboo.
Speaker 1 (15:16):
Now.
Speaker 2 (15:17):
How many of us were saying transitory, Oh my gosh
back in twenty two to two when it came to
everything that we were facing and guess what, it wasn't
all that transitory, and maybe this moment isn't either. But
that is the word that they are not going to
use because of how taboo it is. But it's effectively
if you read through the arguments that they're making, that's
what they're saying is, look, it's terrif related. We'll see
(15:38):
these price increases, there'll be a one time adjustment two prices,
and then things will settle back in at our normal
two percent target. And we're willing to look past all
of that. The obvious risk to all that is they're wrong. Yes,
So do you want to talk about how they could
be wrong when it comes to all this, like how
could they be missing the boat? Here? Let's play out
a completely different scenario, right. The scenario for the last
(16:00):
few months has been tariffs are in place. AI is
playing some role in the labor market that's making employers
less interested in hiring a boatload of people. I have
a personal belief on that that it's not because they're
actually having effective usage of AI. It's just that they
want to signal to markets that they're having an effective
usage of AI. And the best way to do that
(16:21):
is not hiring people.
Speaker 3 (16:22):
Yeah, I think it's more the economic uncertainty that businesses
aren't expanding their labor force more so than AI taking.
Speaker 2 (16:28):
Jobs agreed, So they have been hesitant to hire. That's
led to a you know, it's not a week labor market.
Four point three percent unemployment isn't really a weak labor market,
but it's been pretty low rates of hiring. They've been
hoarding labor. They've been holding off on any big projects
other than artificial intelligence expansion. That's the only thing that
(16:49):
people have been willing to invest in. But housing has
been taking a side. And so the question would be, Okay,
if you're buying that inflation is just transitory and it's
going to have a one time price adjustment because of
tariffs and then die off, how could they be wrong? Well,
let's play that through tariffs could get overruled here in
(17:09):
the next coming months. When it comes to all of this, Yep,
there's been one hundred I think one hundred and fifty
billion dollars worth of tariff revenue collected just since March.
This economy looks really different. If you have to go
refund one hundred and fifty billion dollars to every company
in the United States. Loo's a lot different if those
(17:31):
tariffs go away, you know, companies start buying up everything
that they can to get it in the United States
once again likely we saw earlier this year. Why because
guess what if the Supreme Court does overrule the President
on tariffs, they're not going to just turn away and say, Okay,
we're done. They're going to go and they're going to
go try and create another law and use another deformation
(17:53):
for tariffs. That takes a little bit longer, and so
you're back to that uncertainty. But in the short term,
you potentially have companies buying up everything that they can
hand The last piece on all this, we have a
labor market that has been stuck. Could something unstick it
in some way, shape or form. I'm just not sure
what that looks like, but you sure do have a
(18:14):
lot of money being spent on this artificial intelligence investment.
Should that turn into something on the hiring side that
ticks up hiring. Maybe it's because companies are facing less
uncertainty when it comes to tariffs. Maybe it's something else entirely,
but anything that kind of changes that labor market story
that could change the entire trajectory of all of this
(18:38):
and drive things higher. And then finally, the whole thing
that they're doing is lowering interest rates that is entirely
designed to spur economic activity. So again, I don't really
think that they are wrong on this one. I tend
to believe that they are right to look through the
current inflation that we are seeing in that three percent range.
(18:59):
But they do have this undercurrent of inflation that has
not existed in this economy for decades, and I hope
they don't completely ignore it.
Speaker 3 (19:07):
Yeah, my last piece would be that the inflation increases,
maybe they get a little more substantial than we anticipate
because of just the slow bleeding out of how they've
been phased in, and maybe that causes inflation to run away.
Speaker 2 (19:21):
Quicker quick break. We've got Wall Street Watch coming up next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 3 (20:00):
Markets our mixed territory.
Speaker 4 (20:01):
Putting a bow on a week filled with inflation and
labor data ahead of the FEDS anticipated meeting on tap
next week. Right now, the Dow is down by three
tenths of one percent, or one hundred and forty four
points lower. SMP five hundred is edging only three points higher.
NASDAC up three tenths of one percent or eighty two
points higher. Russell two thousand is down six tenths of
(20:24):
one percent. Tenure Treasure reeled up five basis points today
and is now at four point zero six four percent.
In crude oil up nearly two percent higher, trading at
sixty three dollars and forty five cents a barrel. Well
big news in the media world this morning after CNBC
reported that Paramount Skydance was readying an offer for Warner
Brothers Discovery. However, as of Thursday, Warner Brothers had yet
(20:48):
to receive an offer, but a bid could come as
soon as next week. Yesterday, Warner Brothers stock sored twenty
eight percent on the news and is up another nine
percent to Meanwhile, shares in super Microcomputer rising nearly three
percent after the AI tech firm announced it is now
delivering equipment powered by nvidia's Blackwell Ultra technology in volume
(21:12):
to customers elsewhere. Open Ai and Microsoft reach a deal
to extend their partnership despite a summer of tough negotiations.
Microsoft shares are up by about one percent. Software company
Adobe raised its annual outlook for the second time this
year after reporting better than expected quarterly results. However, that
(21:33):
stock is down by about one percent. Furniture retailer rh
trimmed its annual outlook as it struggles with higher terror
related costs and uncertainty, that stock falling over one percent
and after surging seventy eight percent yesterday. Recent memestock open
Door Technologies is retreating over seven percent today. I'm Tucker
(21:56):
Silva and that is Wall Street Watch.
Speaker 2 (21:58):
According to Well Saint Louis Fed, who sources their data
from realtor dot com, there are currently one point zero
nine to nine million homes for sale in the United States.
That would include condos and other types of listings. We
are officially on the sick look, or the seasonal downward
trend that you get towards the end of the summer
(22:19):
when it comes to home listings. We peaked out at
just over one point one million homes back in July,
and we're assuming that we follow the same trend that
we have for almost every year in modern history when
it comes to home sales, we will start to see
those slide, sorry, home listings. We will start to see
those slide into the fall season here as people delist
(22:41):
their homes ahead of Thanksgiving and Christmas holidays. To give
you a point of comparison, back in August of twenty nineteen,
there are one point two three five million homes for sale,
so still a far cry from where we were, but
obviously getting much closer to a inventory state that is
(23:01):
more similar to where we were back in twenty nineteen.
That varies considerably state to state. We've talked a lot
about that. In Florida you have a much weaker housing
market than you did in twenty nineteen. In Connecticut you
have a one that there's so few homes for sale,
I don't know how everyone anyone even buys one. The
Wall Street Journal asks if the new mortgage rate scenario
(23:24):
that we're seeing now might come to the rescue of
the housing market, and my answer is it all depends
on timing. So in terms of where we are right now,
your average thirty year fixed rate is sitting at six
and a quarter. That probably means that there are some
folks out there that are getting close to under six percent.
For those very high credit ratings that are putting twenty
percent down on a conforming mortgage, you might be getting
(23:46):
into the five nine nine range. On that the average
fifteen year fixed you're looking at five point seven percent.
And so the question therefore is will that be enough
to spur a big fall housing sea or do we
really need to see what happens next spring. When it
comes to all of this, my sense is this is
(24:06):
not enough to move a bunch of potential buyers off
the couch here.
Speaker 3 (24:10):
No, you have to lean on the seasonal trends for that.
I mean, so much of it is driven by once
school gets back in and going, you don't really have
a tremendous amount of volume going off on the fall
winter period. But if the rates were to stay in
around this level, or perhaps lessen and break that six
percent barrier, I think that is a big psychological piece
(24:30):
that if you could get the thirty year fixed at
high fives, then maybe that spurs more buyers into the
market where they can kind of justify the monthly payment
a little bit more if they're sitting at under six percent.
I'm also pretty happy. I think my mortgage predictions that
we did at the beginning of this year have it
somewhere between seven percent and five eight five. So if
(24:52):
I could just get that, that would help.
Speaker 2 (24:54):
Between five eight five and seven. Come on, we're allowed
to have two and a half percent ranges on these guesses.
Speaker 3 (25:01):
Look at what what were the Guessestecker? What do they
say for thirty year of ranges?
Speaker 2 (25:05):
Mine made no sense. I remember that my prediction was
just just gobbllygook.
Speaker 4 (25:10):
Non Yeah, Paul, you had low five eight five, high
seven to one, Chuck had five to two seven eight
call me noster Damas, and Mike had whatever was now,
which was back in December of twenty four and a
lowest six five.
Speaker 2 (25:26):
Oh well, I was way off. There were already six
in a corner. But that said, I didn't decide to
use a three percent swing on my mortgage prediction rates.
So nonetheless, yeah, you're looking like you might win that one, Paul. Yeah,
that's the answer to me. Yes, you will have a
bunch of refinancing activity at these rates, because there are
a bunch of people with seven percent mortgages right now
(25:47):
and so I think they'll be more than happy to
refinance into a six and a quarter or six percent
right now. The fact of the matter, that is not
a huge generator of economic activity. No, No, it's a
bit of a general raider, right because yeah, if you
if you finance down from seven to six, you are
saving a lot on that monthly payment and you can
go blow that on. I don't know what what's the
(26:10):
what's the trendy thing toes the boo boos? Is that
a thing? What the boo boos?
Speaker 4 (26:15):
I have no idea what you're talking about?
Speaker 2 (26:16):
You about?
Speaker 4 (26:17):
No, I don't think anybody does, actually sure?
Speaker 3 (26:22):
What can you describe the item?
Speaker 2 (26:24):
The boo boo?
Speaker 1 (26:26):
What is?
Speaker 2 (26:27):
This is a popular character and line of collectible blind
box toys created by Hong Kong artist Casting Lung that
are sweeping the nation right now of nine and seven
year old girls.
Speaker 3 (26:39):
My god, So that's what you do with your housing
excess catch.
Speaker 2 (26:45):
So everybody's going out there and buying the boo boos?
Would be my guess when it comes to all these things. Yeah, yeah,
I think I think a famous tennis player had one
on her on her tennis bag and it made.
Speaker 3 (26:57):
I thought, you were gonna go with, like, you know,
spend money to redo the the porch.
Speaker 2 (27:01):
Just a whole of probably probably these labuobuos and then
those rubber ducks that everybody likes to put on their
jeeps these days or other jeep don't get me started.
I don't know how that works, but I'm glad I'm
not part of that.
Speaker 4 (27:15):
These wranglers driving around with like three hundred ducks just
covering their dashboard for some stupid reason. The whole thing
with the wranglers and looking.
Speaker 2 (27:25):
No idea what he's talking about.
Speaker 3 (27:26):
I kind of seeing the ducks thing, but I didn't
know where that stems from. Is it like a TikTok prank?
Speaker 4 (27:31):
No, it's it's it's a jeep thing. I don't know
what the camaraderie is with jeep jeeps and like wave
into each other, Like.
Speaker 2 (27:38):
When your car breaks down every three thousand miles, you
have to have like a community to surround you on
you know what to do when these things happen.
Speaker 4 (27:46):
Like my wife has a jeep compass, and I see
people like waving to me all the time out when
you're not when you're a beautiful Italian car breaks down,
wave not accepted.
Speaker 3 (27:55):
Jeep ducking. I did not know this is the thing.
Speaker 2 (27:58):
Well, I'm glad we got to cover it on this front.
Let's take a quick break. When we do come back,
I want to talk one more time about the labor market.
We've been talking a lot about labor hoarding this year.
Employers not quite willing to leave their employees, employees unwilling
to jump ship and go somewhere else. Quick break labor hoardings.
Next on The Financial Exchange.
Speaker 1 (28:19):
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Speaker 2 (29:23):
Connor sent from Bloomberg, is out with an opinion piece
on labor hoarding. So let's talk about that first before
we get any further. Paul, there is compelling data that
would indicate that labor turnover of any sort has been
way down. You take a look at quits rates, at
firing rates, all of these things are pretty low, and
(29:44):
I helped. I think that helps explain the low unemployment rate.
How would I explain why this is the case. You know,
I think that generally speaking, companies, financials have been in
relatively good shape over the last few year years. They
haven't been pressured to lay people off on the hiring side, though,
(30:05):
they've been kind of taking a wait and see approach
when it comes to things like tariffs and artificial intelligence
and how those technologies are going to work out and
change their hiring plans, and how rather tariff policy is
going to change those hiring plans. And so it's been
in a place where, hey, you know, our stock price
is doing Okay, we have enough profit to continue to
pay wages, but we're not going to offer big bonuses
(30:27):
or increases because we just don't feel like we need
to at this stage. What is kind of layout as
an argument for why that might be coming to an
end or changing here. I don't know that I see
a ton of really compelling evidence here, but he makes
a few points about the state of the labor market.
Speaker 3 (30:44):
Yeah, I think that some of the factors that you
have in places, the labor supply is something that you
have to consider here too, that perhaps where there's not
going to be as robust of a supply of people
looking for positions, that further re emphasizes that point of
just keeping the people that you have on staff. But
they he does make the argument that the scenario could
(31:05):
come to pass that you would start firing some of
the older workers to take advantage of the new up
and coming, the cheap up and comers. You know, I
don't think it's to that point yet, but we've talked
about how the college graduate market in terms of new
jobs was very weak this year. Doesn't get do you
go through two cycles of this where we have another
you know, range of graduations come in in May of
(31:27):
twenty six, and you get through two cycles where you
have a bunch of young people looking for work and
all of a sudden bringing them on it. I don't know,
fifty sixty K looks a lot more enticing than paying
more for that that senior person.
Speaker 2 (31:39):
That was my first role right out of college during
the Great Recession. It was not made explicit to me
during the hiring process, but within my first few weeks
there I was getting a vibe and then in explicit
comment from somebody about how I, you know, effectively replaced
somebody that was making over one hundred thousand dollars just
a few years ago and got laid off during the recession,
(32:01):
and you know, higher little old college grad mic for
probably half of what they were paying that person to do,
you know, ninety percent of the same job. And so
I do find that piece compelling. There is a large
cohort of twenty something year olds that are looking for
white collar work, in particular not finding it. On the
(32:22):
other end, you've got these companies that are holding on
to employees who are getting older every year, and so
in the event of any sort of financial pressure, I
can see a compelling case for why they would go
on a layoff spree and then a rehiring of those
younger employees. But I do think there has to be
(32:43):
some form of financial pressure. I don't think it's just automatic.
I don't think that employers oftentimes just sit there and say, yeah,
let's conduct a few thousand layoffs just for the sake
of saving, you know, a few bucks on labor. I
don't think that's usually how it works out.
Speaker 3 (32:58):
No, tactically, it's not something you know what I was
reading about recently with the Japanese labor market, I had
no idea this is a concept. With older workers there,
they just sunset them to just work at a desk
with a window and no files in front of them,
and keep them on as employees and still pay them
just for respect for the elderly, and then they just.
Speaker 2 (33:21):
Give them more work, give them more work, and then
file them fire them. I could not believe.
Speaker 3 (33:28):
It's literally like George Costanza where they just have him
with the Penske file and these people don't even have files.
But anyway, I digress there. It does seem like the
layoff piece is something that companies turn to as a
last resort. Rather you've seen the tactical moves of an Amazon,
and many others have followed the same procedure too, of hey,
everyone come back into the office five days a week,
(33:49):
no more remote work. If you don't like it, you
can leave. And that's been an easier way to kind
of force people out to a certain path to leave
that position, rather than doing the traditional layoff measure.
Speaker 2 (34:03):
One other piece on the labor market that I was
at a conference earlier this week. I wasn't doing the
radio program, I wasn't working. I was speaking to other
financial professionals. And at all of these things they always
do all sorts of demographic surveys and try to tell
you about different generations. Because again it's a survey, it's
a financial advisor conference. They don't want to tell you
about that next generation and how you're going to bring
(34:24):
them on as clients. And they came up with a
bunch of stuff that I just it reminds me exactly
of how everybody was describing millennials last time, you know.
This time it was, Oh, they're really not tied down
to a specific location or job they want. They like
the idea of being able to hop around. They don't
look at the workforces the way that we used to
do traditionally, where you would work for an employer long term,
(34:45):
and I don't know, to me, that reminded me exactly
of all the millennial stuff like, oh, they don't want
to own homes, they wanted the flexibility of renting forever.
And then guess what millennial home ownership is exactly where
it was for their parents' generation by their mid thirties.
And so a lot is going to be said about
these you know, gen zers and where they are going
(35:07):
to work into the labor force and what they want.
And I think my answer is, don't listen to surveys
about that generation and how different they are, because generation
after generation has proven that they just aren't all that different.
They do want to own homes, they do want stable
careers that play them good benefits. And once they realize that,
(35:28):
and you know, aren't. Look at twenty two, I wanted
to go travel the world and only work for an
employer nine months of the year two and then I
quickly realized how impractical that is and realized that I
needed to get a job. So I just take all
of that with a grain of salt, and I would
encourage everybody else to as well, because I just don't
buy some of these trends.
Speaker 3 (35:47):
No, it's always there's always these concepts on the fringes
that you hear about, like ones you just mentioned about
flexibility and not owning a home and things like that.
But I don't think that represents the overwhelming Maybe they're right,
maybe there is a uptick in those people who feel
that way, but still, at the crux of it, the
majority of the generation ends up falling to similar trends.
(36:10):
For the most.
Speaker 2 (36:11):
Part, folks, we have markets again touching near all time highs. Here.
We have seen a pretty dramatic shift in the way
interest rates are likely to be headed over the course
of the next few months, and for many the economy
scenes to be at some sort of turning point. If
you are staring down this market and scratching your head
(36:34):
or just wondering what comes next, I'd like to talk
to you about two events that we have the Armstrong
Advisory Group are putting on. One of them is going
to be down on Cape cod the other one in
Chestnut Hill, Massachusetts. The first is at the Margaritaville Resorts
on October ninth. The second down at the showcase Superlux
and Chestnut Hill on October sixteenth, Both of them will
(36:55):
be doing a live broadcast of this show, the Financial Exchange,
followed by a seminar from Armstrong Advisory Group. Join us
for lunch. We'll be talking about all things markets, economy
and what it means for your financial strategy. If you
want more information, there's a ton of it online at
Armstrong Advisory dot com. There's a little banner right at
the top that gives you details on the event. You
(37:16):
can sign up there too, but space is limited for
these events. Again, there's two of them, one on October ninth,
the second on October sixteenth. If you're going to be
in the area and you want to catch a live
version of the show and chat with us after, call
us at eight hundred three nine three for zero zero one.
Check us out at Armstrong Advisory dot com slash events.
(37:38):
But that number once again eight hundred three nine three
for zero zero one.
Speaker 1 (37:44):
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Speaker 2 (37:59):
As we adhere to the top of the hour, we've
got an incredibly boring stock market. As we close things
out here, the Dow is off one hundred and forty
eight points, or one third of one percent, the S
and P five hundred up six points, less than one
tenth of one percent, and the Nasdaq seeing a little
bit of move to the upside here, up one hundred
and two points nearly half a percent in the trading
(38:22):
so far today. The yield and the ten yure treasury,
a main driver of mortgage rates and other types of loans,
back up over four percent after dipping below there over
the course of the last few days, sitting at four
point zero six four percent, and oil moving up a
little bit on risk of Russian output, up one and
a half percent in early trading. We got a lot
(38:43):
more to cover in the second hour here, folks, stay tuned,
We'll be right back
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(01:06):
and Paul Lane.
Speaker 2 (01:10):
Happy Friday, and welcome back to the Financial Exchange. It's Mike,
Paul and Tucker with you on a Friday. After a
big inflation report Thursday. But frankly, all of this news
this week getting buried given the murder of Charlie Kirk.
There's a press briefing going on as we speak at
the moment, it looks like in Salt Lake City on
that subject. But to that end, I think, in part
(01:34):
because of that, any of the financial news that has
come out this week, Paul has not really been covered
by the press. And I was speaking with Mac Ganion
this morning out of Portland about this subject, which is
for good reason. This has not been the most important
thing that has mattered. And yet we have markets sitting
here again at all time his The Dow rallied above
forty six thousand for the first time ever yesterday, and
(01:58):
we have a Federal Reserve meeting coming just next week,
if I'm not mistaken, yes next week becoming the Federal
Reserve meeting. So a lot to cover here in the
world of finance, markets and the economy, and we'll be
getting right to it. But I think we start off
with the recap yesterday. Again, if you did not see
it yesterday, we got an inflation reading that was not
(02:22):
extraordinarily bad. It was elevated, but not elevated enough to
really reverse any of the thinking on the Fed's next moves.
We also got a weekly jobless claims number that came
in hotter than expected, meaning more people leaving those jobs,
probably involuntarily. And again, the way that we summarize those
(02:45):
from yesterday, Paul was both of these in and of themselves,
for one reading, are not terribly concerning, but could represent
a new trend line that is worth keeping an eye on. Nonetheless,
a lot of this bad news for the economy has
meant good news for markets, and some of that's logical,
some of it's not. But nonetheless, I think all of
(03:09):
the data this week either solidified the perspective that the
FED should be cutting rates or at least did not
thoroughly negate that perspective that, yeah, the FED should be
moving forward with rate cuts at this stage, and so
all expectations are that we are ago with at least
a twenty five basis point cut when we meet with
(03:29):
the FED and their press conference next week.
Speaker 3 (03:31):
Yeah, I think the biggest subject this week is really
where the Fed sits at this point. We've talked about
on the show a lot. They have two primary responsibilities,
which is price stability, that's inflation, and then the labor market.
And what's so interesting about this week where the Federal
Reserve is positioned, is that it is very clear that
there is certainly a weakening in the labor market. You
(03:52):
could argue how severe that it is, but it would
be hard to argue that we're not seeing at least
a trend of the labor marketing over the course of
the last six to twelve months or so.
Speaker 2 (04:03):
Meanwhile, you let's talk about that for a minute, because
I don't know that everybody is experiencing that. I think
if you are listening here in the Boston area, you
might be understanding that quite a bit because unemployment rate
in the Massachusetts it is like the tenth worst in
the state and has changed pretty dramatically since the beginning
of the year. But if you're in New Hampshire, or
if you're in the Midwest right now and listening, you
(04:24):
might not be feeling that week. Labor market. What are
the indications that you're using and what did we see?
They're big revisions this week for example, about a weakening
labor mind.
Speaker 3 (04:33):
Yeah, so the unemployment rates up to four point three
percent we saw from March of twenty twenty five through
March of twenty twenty four, they went back and revised down.
Nine hundred and eleven thousand jobs were taken away in
terms of growth over that period of time. And then
from a sector perspective, if you look at the more
recent months data, we're now averaging in around with that revision,
(04:54):
it's somewhere around seventy four thousand. If you look back
at the span of the last twelve to eighteen months,
from a sector perspective, on the white collar jobs, those
service business services kind of positions, you're seeing a lot
less hiring in those areas. Really, what's only been propping
up employment growth in general has been healthcare services. That
has been really the main sector where we've seen growth.
(05:15):
But otherwise as we're getting old, yeah, there's a lot
of healthcare spending, which we'll talk about later in the
show today because healthcare costs don't seem to want to
go down. But that aside just a labor market in
general that has been weaker because of those intericators that
we're seeing. It's not a tremendous amount of layoffs or
firings that we're seeing just yet, but certainly the job
(05:36):
growth has slow. There's no way you can argue that.
Speaker 2 (05:38):
Yeah, that piece is true. The complex. Yeah, to get
to your point here, Paul, it's really unclear how many
jobs we need to create on a monthly basis in
order to keep the unemployment rate low. But what is
fairly clear is that if we only create twenty to
fifty thousand jobs per month, whether the unemployment rate goes
(06:01):
up or not, it's going to be tough to see
economic growth. Yeah, I think that's where I land is. Yeah,
unemployment rate could stay down here in the four point
three percent range, but if we keep creating jobs at
such a slow pace, then consumer spending won't increase. People
won't be able to move from job to job and
see those wage increases, and so we're going to be
kind of in a languishing point when it comes to
(06:22):
the labor market, regardless of that unemployment.
Speaker 3 (06:25):
So that's one side of the equation, And what makes
it more fascinating this week is that we have the
inflationary picture, which you just mentioned, that is trending in
the other direction, where inflation has been ticking up from
the low that it reached back in April. On a
year over year basis, it was sitting at two point
three percent. We now just had a report that came
out at two point nine percent. Obviously the Fed's target
is two percent. That has been a huge concern this year,
(06:47):
and probably what we've spent more time focusing on this
year from our show and other news publications is concerns
about tariffs leading to inflationary pressure. And really what the
FED has come out and committed to is there Our
focus is now on the labor market. This inflationary report
was not so bad that that would cause a shift
(07:09):
in plan here. So really what we're going to see
from this rate cup, very likely coming next Wednesday, is
a twenty five basis point cut and a Fed that
is more focused on the employment market. And what is
puzzling to me a little bit which we can get into,
is the stock market rallied pretty significantly off of the
news yesterday on that inflation report, which I wouldn't have
(07:30):
rated as a tremendous report. I wouldn't say it was disastrous,
but because of that premise of lower rates, which can
impact asset values positively. We had a market rally even
against a backdrop that I would say is kind of
mixed at the moment.
Speaker 2 (07:44):
Yeah, it is. But here's where I always land when
we're talking about economic data and how it's going to
affect the FED. And what makes it really really difficult
to take take a market's perspective on all of this
is you have to remove yourself from what I would
do in this scenario and put yourself in the role
(08:05):
of J. Powell and those other eleven voting members of
the FED and say, Okay, I might view things this way,
but what would J. Powell and what would the Federal
Reserve Board and Committee be doing in this case? And
all evidence points to a FED that over the last
five years has been far more interested in what's happening
(08:27):
in the labor market and concerned about how they can
improve that labor market story than what is happening in
the inflation side of things. We saw it in twenty
twenty two when they were very late to the game,
and I see no compelling evidence why we wouldn't see
it again this time. So let's take a quick break
here when we do come back. I want to speak
a little bit more about that inflation report. What were
(08:50):
the bad items, what were the things that we're really
driving up prices? And why might the Fed be willing
to look through all of that for a lower interest
rate environment. That's next here on the Financial Exchange.
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Speaker 2 (10:12):
So, Paul, we're talking about the labor market and inflation.
We're talking about it because that's all we talk about
on the financial Exchange. I'm joking, but we do. We
do have a Federal Reserve meeting early next week, and
markets seem to be anticipating a rate cut. And I
don't mean seem to be. They are anticipating a rate cut.
Speaker 3 (10:30):
Question is how big really? I mean, well, it's pretty
clear it'll be the quarterback.
Speaker 2 (10:34):
It seems to be. Yeah. There is currently, according to
Chicago Mercantile Exchange, where you can look at prediction markets
on interest rate cuts or hikes, there is a ninety
two point four percent likelihood of a quarter percentage point cut.
There's a seven and a half percent chance of a
fifty basis point cut. So the reason why I think
(10:54):
quarter is the most likely scenario is because of these
underlying inflation concerns. But I gotta say I think that
the Fed will be willing to look through them a
little bit. The Journal has a piece today on twelve
month price changes from where they were a year ago.
These are always interesting to look at. Coffee top the
(11:15):
list here in terms of August changes, up twenty one
percent from last year.
Speaker 3 (11:19):
Almost sput out my coffee when I read that sucks.
Speaker 2 (11:23):
Auto repair up fifteen percent. That's likely again tariff related,
as is coffee. By the way, this stuff comes from
Vietnam and Brazil, both of which are facing double digit
percentage rates on tariffs. We don't grow that here in
the United States. Ground beef up thirteen percent, not really
terif related, apples up ten percent, bananas up six point six,
(11:43):
used vehicles up six, tools in hardware up nearly six,
oranges up five. There's a lot of other price increases
in here. Two furniture, paper products, a bunch of other
food categories. But a lot of this stuff is seeing
some upticks. Others are really not. Women's apparel is down
in pricing, and I can't really explain that, to be
(12:04):
quite honest, which is why I don't think you actually
want to focus on each of these individual categories. But
if I am the FED and I'm taking a look
at yesterday's inflation report, which again, if you missed it,
prices were up two point nine percent year over year
four tenths of a percent for the month. When you
strip out the food and energy impact, prices were up
even more year over year because generally energy prices have
(12:27):
been coming down of the course of the last year.
Stripping those pieces out, prices are up three point one
percent and three tenths of a percent for the month.
These are underlying trends that are pretty high. But if
I'm looking at this report, I'm looking at it and
I'm saying, Okay, we've got services prices that are on
the move. Yes, that is a concern, but frankly, the
pace at which services are going up is right around
(12:49):
what's normal. What is changing here is that goods prices
are moving up right now. If I'm them, I'm blaming
this on tariffs. If I'm the Fed, I'm blaming If
I'm the Federal Reserve, if I'm J. Powell, I'm blaming
these price increases on tariffs, because honestly, look through the list,
most of those big price upticks could be blamed on tariffs.
(13:12):
They could also be you know, changes to farming because
of immigration and other factors. But if I'm the FED,
I'm probably not banking on that. I'm thinking this is
because of tariffs, and if I really care about what
things look like a few years from now, because that's
what my policy affects. I don't really care about the
tariff impact. Why it's going to drive up prices once
(13:36):
and then you know a year from now. If I'm
the FED, I don't exactly expect coffee prices to be
up another twenty one percent. We've already built in that
tariff effect. And if anything, the year over year comps
should look better. The year over year comps should look better.
You could have more tariff negotiations, maybe Brazil is not
paying fifty percent tariffs or all of these different things. Heck,
it's with the Supreme Court right now. You don't even
(13:58):
know if it's going to be overned entirely. So I
think the more and more I've considered all of this,
am I concerned about underlying inflation and what it will
look like a few years from now? Yes? I am.
I think it could be an overlooked variable that is
not being paid enough attention to. But if I'm putting
myself in J. Powell's shoes and the FED shoes. I
(14:20):
am embarking on a rate cutting cycle that probably lasts
more than one meeting. I do think with the trend
that you're seeing in employment right now, all else equal,
you're cutting rates by a little bit at this meeting,
and you are indicating that you're going to go further
at the next several.
Speaker 3 (14:35):
That makes sense. You're throwing all your resources at employment.
I can see the logic behind the decision to sort
of put inflation on the back burner for the moment
and recognize that the labor market is a more near
term threat for the economy. But I don't love the
idea of shrugging off inflation. But I can get the logic.
Speaker 2 (14:56):
Yeah, I mean they were wrong to shrug it off
three years ago. The piece that gives me real pause
is they completely misread everything three years ago when it
came to inflation, and they are basically if they just
you know again, if you buy the argument that I
just made, then you're buying the transitory argument once again, right,
And that word is taboo.
Speaker 1 (15:16):
Now.
Speaker 2 (15:17):
How many of us were saying transitory, Oh my gosh
back in twenty two to two when it came to
everything that we were facing and guess what, it wasn't
all that transitory, and maybe this moment isn't either. But
that is the word that they are not going to
use because of how taboo it is. But it's effectively
if you read through the arguments that they're making, that's
what they're saying is, look, it's terrif related. We'll see
(15:38):
these price increases, there'll be a one time adjustment two prices,
and then things will settle back in at our normal
two percent target. And we're willing to look past all
of that. The obvious risk to all that is they're wrong. Yes,
So do you want to talk about how they could
be wrong when it comes to all this, like how
could they be missing the boat? Here? Let's play out
a completely different scenario, right. The scenario for the last
(16:00):
few months has been tariffs are in place. AI is
playing some role in the labor market that's making employers
less interested in hiring a boatload of people. I have
a personal belief on that that it's not because they're
actually having effective usage of AI. It's just that they
want to signal to markets that they're having an effective
usage of AI. And the best way to do that
(16:21):
is not hiring people.
Speaker 3 (16:22):
Yeah, I think it's more the economic uncertainty that businesses
aren't expanding their labor force more so than AI taking.
Speaker 2 (16:28):
Jobs agreed, So they have been hesitant to hire. That's
led to a you know, it's not a week labor market.
Four point three percent unemployment isn't really a weak labor market,
but it's been pretty low rates of hiring. They've been
hoarding labor. They've been holding off on any big projects
other than artificial intelligence expansion. That's the only thing that
(16:49):
people have been willing to invest in. But housing has
been taking a side. And so the question would be, Okay,
if you're buying that inflation is just transitory and it's
going to have a one time price adjustment because of
tariffs and then die off, how could they be wrong? Well,
let's play that through tariffs could get overruled here in
(17:09):
the next coming months. When it comes to all of this, Yep,
there's been one hundred I think one hundred and fifty
billion dollars worth of tariff revenue collected just since March.
This economy looks really different. If you have to go
refund one hundred and fifty billion dollars to every company
in the United States. Loo's a lot different if those
(17:31):
tariffs go away, you know, companies start buying up everything
that they can to get it in the United States
once again likely we saw earlier this year. Why because
guess what if the Supreme Court does overrule the President
on tariffs, they're not going to just turn away and say, Okay,
we're done. They're going to go and they're going to
go try and create another law and use another deformation
(17:53):
for tariffs. That takes a little bit longer, and so
you're back to that uncertainty. But in the short term,
you potentially have companies buying up everything that they can
hand The last piece on all this, we have a
labor market that has been stuck. Could something unstick it
in some way, shape or form. I'm just not sure
what that looks like, but you sure do have a
(18:14):
lot of money being spent on this artificial intelligence investment.
Should that turn into something on the hiring side that
ticks up hiring. Maybe it's because companies are facing less
uncertainty when it comes to tariffs. Maybe it's something else entirely,
but anything that kind of changes that labor market story
that could change the entire trajectory of all of this
(18:38):
and drive things higher. And then finally, the whole thing
that they're doing is lowering interest rates that is entirely
designed to spur economic activity. So again, I don't really
think that they are wrong on this one. I tend
to believe that they are right to look through the
current inflation that we are seeing in that three percent range.
(18:59):
But they do have this undercurrent of inflation that has
not existed in this economy for decades, and I hope
they don't completely ignore it.
Speaker 3 (19:07):
Yeah, my last piece would be that the inflation increases,
maybe they get a little more substantial than we anticipate
because of just the slow bleeding out of how they've
been phased in, and maybe that causes inflation to run away.
Speaker 2 (19:21):
Quicker quick break. We've got Wall Street Watch coming up next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 3 (20:00):
Markets our mixed territory.
Speaker 4 (20:01):
Putting a bow on a week filled with inflation and
labor data ahead of the FEDS anticipated meeting on tap
next week. Right now, the Dow is down by three
tenths of one percent, or one hundred and forty four
points lower. SMP five hundred is edging only three points higher.
NASDAC up three tenths of one percent or eighty two
points higher. Russell two thousand is down six tenths of
(20:24):
one percent. Tenure Treasure reeled up five basis points today
and is now at four point zero six four percent.
In crude oil up nearly two percent higher, trading at
sixty three dollars and forty five cents a barrel. Well
big news in the media world this morning after CNBC
reported that Paramount Skydance was readying an offer for Warner
Brothers Discovery. However, as of Thursday, Warner Brothers had yet
(20:48):
to receive an offer, but a bid could come as
soon as next week. Yesterday, Warner Brothers stock sored twenty
eight percent on the news and is up another nine
percent to Meanwhile, shares in super Microcomputer rising nearly three
percent after the AI tech firm announced it is now
delivering equipment powered by nvidia's Blackwell Ultra technology in volume
(21:12):
to customers elsewhere. Open Ai and Microsoft reach a deal
to extend their partnership despite a summer of tough negotiations.
Microsoft shares are up by about one percent. Software company
Adobe raised its annual outlook for the second time this
year after reporting better than expected quarterly results. However, that
(21:33):
stock is down by about one percent. Furniture retailer rh
trimmed its annual outlook as it struggles with higher terror
related costs and uncertainty, that stock falling over one percent
and after surging seventy eight percent yesterday. Recent memestock open
Door Technologies is retreating over seven percent today. I'm Tucker
(21:56):
Silva and that is Wall Street Watch.
Speaker 2 (21:58):
According to Well Saint Louis Fed, who sources their data
from realtor dot com, there are currently one point zero
nine to nine million homes for sale in the United States.
That would include condos and other types of listings. We
are officially on the sick look, or the seasonal downward
trend that you get towards the end of the summer
(22:19):
when it comes to home listings. We peaked out at
just over one point one million homes back in July,
and we're assuming that we follow the same trend that
we have for almost every year in modern history when
it comes to home sales, we will start to see
those slide, sorry, home listings. We will start to see
those slide into the fall season here as people delist
(22:41):
their homes ahead of Thanksgiving and Christmas holidays. To give
you a point of comparison, back in August of twenty nineteen,
there are one point two three five million homes for sale,
so still a far cry from where we were, but
obviously getting much closer to a inventory state that is
(23:01):
more similar to where we were back in twenty nineteen.
That varies considerably state to state. We've talked a lot
about that. In Florida you have a much weaker housing
market than you did in twenty nineteen. In Connecticut you
have a one that there's so few homes for sale,
I don't know how everyone anyone even buys one. The
Wall Street Journal asks if the new mortgage rate scenario
(23:24):
that we're seeing now might come to the rescue of
the housing market, and my answer is it all depends
on timing. So in terms of where we are right now,
your average thirty year fixed rate is sitting at six
and a quarter. That probably means that there are some
folks out there that are getting close to under six percent.
For those very high credit ratings that are putting twenty
percent down on a conforming mortgage, you might be getting
(23:46):
into the five nine nine range. On that the average
fifteen year fixed you're looking at five point seven percent.
And so the question therefore is will that be enough
to spur a big fall housing sea or do we
really need to see what happens next spring. When it
comes to all of this, my sense is this is
(24:06):
not enough to move a bunch of potential buyers off
the couch here.
Speaker 3 (24:10):
No, you have to lean on the seasonal trends for that.
I mean, so much of it is driven by once
school gets back in and going, you don't really have
a tremendous amount of volume going off on the fall
winter period. But if the rates were to stay in
around this level, or perhaps lessen and break that six
percent barrier, I think that is a big psychological piece
(24:30):
that if you could get the thirty year fixed at
high fives, then maybe that spurs more buyers into the
market where they can kind of justify the monthly payment
a little bit more if they're sitting at under six percent.
I'm also pretty happy. I think my mortgage predictions that
we did at the beginning of this year have it
somewhere between seven percent and five eight five. So if
(24:52):
I could just get that, that would help.
Speaker 2 (24:54):
Between five eight five and seven. Come on, we're allowed
to have two and a half percent ranges on these guesses.
Speaker 3 (25:01):
Look at what what were the Guessestecker? What do they
say for thirty year of ranges?
Speaker 2 (25:05):
Mine made no sense. I remember that my prediction was
just just gobbllygook.
Speaker 4 (25:10):
Non Yeah, Paul, you had low five eight five, high
seven to one, Chuck had five to two seven eight
call me noster Damas, and Mike had whatever was now,
which was back in December of twenty four and a
lowest six five.
Speaker 2 (25:26):
Oh well, I was way off. There were already six
in a corner. But that said, I didn't decide to
use a three percent swing on my mortgage prediction rates.
So nonetheless, yeah, you're looking like you might win that one, Paul. Yeah,
that's the answer to me. Yes, you will have a
bunch of refinancing activity at these rates, because there are
a bunch of people with seven percent mortgages right now
(25:47):
and so I think they'll be more than happy to
refinance into a six and a quarter or six percent
right now. The fact of the matter, that is not
a huge generator of economic activity. No, No, it's a
bit of a general raider, right because yeah, if you
if you finance down from seven to six, you are
saving a lot on that monthly payment and you can
go blow that on. I don't know what what's the
(26:10):
what's the trendy thing toes the boo boos? Is that
a thing? What the boo boos?
Speaker 4 (26:15):
I have no idea what you're talking about?
Speaker 2 (26:16):
You about?
Speaker 4 (26:17):
No, I don't think anybody does, actually sure?
Speaker 3 (26:22):
What can you describe the item?
Speaker 2 (26:24):
The boo boo?
Speaker 1 (26:26):
What is?
Speaker 2 (26:27):
This is a popular character and line of collectible blind
box toys created by Hong Kong artist Casting Lung that
are sweeping the nation right now of nine and seven
year old girls.
Speaker 3 (26:39):
My god, So that's what you do with your housing
excess catch.
Speaker 2 (26:45):
So everybody's going out there and buying the boo boos?
Would be my guess when it comes to all these things. Yeah, yeah,
I think I think a famous tennis player had one
on her on her tennis bag and it made.
Speaker 3 (26:57):
I thought, you were gonna go with, like, you know,
spend money to redo the the porch.
Speaker 2 (27:01):
Just a whole of probably probably these labuobuos and then
those rubber ducks that everybody likes to put on their
jeeps these days or other jeep don't get me started.
I don't know how that works, but I'm glad I'm
not part of that.
Speaker 4 (27:15):
These wranglers driving around with like three hundred ducks just
covering their dashboard for some stupid reason. The whole thing
with the wranglers and looking.
Speaker 2 (27:25):
No idea what he's talking about.
Speaker 3 (27:26):
I kind of seeing the ducks thing, but I didn't
know where that stems from. Is it like a TikTok prank?
Speaker 4 (27:31):
No, it's it's it's a jeep thing. I don't know
what the camaraderie is with jeep jeeps and like wave
into each other, Like.
Speaker 2 (27:38):
When your car breaks down every three thousand miles, you
have to have like a community to surround you on
you know what to do when these things happen.
Speaker 4 (27:46):
Like my wife has a jeep compass, and I see
people like waving to me all the time out when
you're not when you're a beautiful Italian car breaks down,
wave not accepted.
Speaker 3 (27:55):
Jeep ducking. I did not know this is the thing.
Speaker 2 (27:58):
Well, I'm glad we got to cover it on this front.
Let's take a quick break. When we do come back,
I want to talk one more time about the labor market.
We've been talking a lot about labor hoarding this year.
Employers not quite willing to leave their employees, employees unwilling
to jump ship and go somewhere else. Quick break labor hoardings.
Next on The Financial Exchange.
Speaker 1 (28:19):
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(29:05):
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Speaker 2 (29:23):
Connor sent from Bloomberg, is out with an opinion piece
on labor hoarding. So let's talk about that first before
we get any further. Paul, there is compelling data that
would indicate that labor turnover of any sort has been
way down. You take a look at quits rates, at
firing rates, all of these things are pretty low, and
(29:44):
I helped. I think that helps explain the low unemployment rate.
How would I explain why this is the case. You know,
I think that generally speaking, companies, financials have been in
relatively good shape over the last few year years. They
haven't been pressured to lay people off on the hiring side, though,
(30:05):
they've been kind of taking a wait and see approach
when it comes to things like tariffs and artificial intelligence
and how those technologies are going to work out and
change their hiring plans, and how rather tariff policy is
going to change those hiring plans. And so it's been
in a place where, hey, you know, our stock price
is doing Okay, we have enough profit to continue to
pay wages, but we're not going to offer big bonuses
(30:27):
or increases because we just don't feel like we need
to at this stage. What is kind of layout as
an argument for why that might be coming to an
end or changing here. I don't know that I see
a ton of really compelling evidence here, but he makes
a few points about the state of the labor market.
Speaker 3 (30:44):
Yeah, I think that some of the factors that you
have in places, the labor supply is something that you
have to consider here too, that perhaps where there's not
going to be as robust of a supply of people
looking for positions, that further re emphasizes that point of
just keeping the people that you have on staff. But
they he does make the argument that the scenario could
(31:05):
come to pass that you would start firing some of
the older workers to take advantage of the new up
and coming, the cheap up and comers. You know, I
don't think it's to that point yet, but we've talked
about how the college graduate market in terms of new
jobs was very weak this year. Doesn't get do you
go through two cycles of this where we have another
you know, range of graduations come in in May of
(31:27):
twenty six, and you get through two cycles where you
have a bunch of young people looking for work and
all of a sudden bringing them on it. I don't know,
fifty sixty K looks a lot more enticing than paying
more for that that senior person.
Speaker 2 (31:39):
That was my first role right out of college during
the Great Recession. It was not made explicit to me
during the hiring process, but within my first few weeks
there I was getting a vibe and then in explicit
comment from somebody about how I, you know, effectively replaced
somebody that was making over one hundred thousand dollars just
a few years ago and got laid off during the recession,
(32:01):
and you know, higher little old college grad mic for
probably half of what they were paying that person to do,
you know, ninety percent of the same job. And so
I do find that piece compelling. There is a large
cohort of twenty something year olds that are looking for
white collar work, in particular not finding it. On the
(32:22):
other end, you've got these companies that are holding on
to employees who are getting older every year, and so
in the event of any sort of financial pressure, I
can see a compelling case for why they would go
on a layoff spree and then a rehiring of those
younger employees. But I do think there has to be
(32:43):
some form of financial pressure. I don't think it's just automatic.
I don't think that employers oftentimes just sit there and say, yeah,
let's conduct a few thousand layoffs just for the sake
of saving, you know, a few bucks on labor. I
don't think that's usually how it works out.
Speaker 3 (32:58):
No, tactically, it's not something you know what I was
reading about recently with the Japanese labor market, I had
no idea this is a concept. With older workers there,
they just sunset them to just work at a desk
with a window and no files in front of them,
and keep them on as employees and still pay them
just for respect for the elderly, and then they just.
Speaker 2 (33:21):
Give them more work, give them more work, and then
file them fire them. I could not believe.
Speaker 3 (33:28):
It's literally like George Costanza where they just have him
with the Penske file and these people don't even have files.
But anyway, I digress there. It does seem like the
layoff piece is something that companies turn to as a
last resort. Rather you've seen the tactical moves of an Amazon,
and many others have followed the same procedure too, of hey,
everyone come back into the office five days a week,
(33:49):
no more remote work. If you don't like it, you
can leave. And that's been an easier way to kind
of force people out to a certain path to leave
that position, rather than doing the traditional layoff measure.
Speaker 2 (34:03):
One other piece on the labor market that I was
at a conference earlier this week. I wasn't doing the
radio program, I wasn't working. I was speaking to other
financial professionals. And at all of these things they always
do all sorts of demographic surveys and try to tell
you about different generations. Because again it's a survey, it's
a financial advisor conference. They don't want to tell you
about that next generation and how you're going to bring
(34:24):
them on as clients. And they came up with a
bunch of stuff that I just it reminds me exactly
of how everybody was describing millennials last time, you know.
This time it was, Oh, they're really not tied down
to a specific location or job they want. They like
the idea of being able to hop around. They don't
look at the workforces the way that we used to
do traditionally, where you would work for an employer long term,
(34:45):
and I don't know, to me, that reminded me exactly
of all the millennial stuff like, oh, they don't want
to own homes, they wanted the flexibility of renting forever.
And then guess what millennial home ownership is exactly where
it was for their parents' generation by their mid thirties.
And so a lot is going to be said about
these you know, gen zers and where they are going
(35:07):
to work into the labor force and what they want.
And I think my answer is, don't listen to surveys
about that generation and how different they are, because generation
after generation has proven that they just aren't all that different.
They do want to own homes, they do want stable
careers that play them good benefits. And once they realize that,
(35:28):
and you know, aren't. Look at twenty two, I wanted
to go travel the world and only work for an
employer nine months of the year two and then I
quickly realized how impractical that is and realized that I
needed to get a job. So I just take all
of that with a grain of salt, and I would
encourage everybody else to as well, because I just don't
buy some of these trends.
Speaker 3 (35:47):
No, it's always there's always these concepts on the fringes
that you hear about, like ones you just mentioned about
flexibility and not owning a home and things like that.
But I don't think that represents the overwhelming Maybe they're right,
maybe there is a uptick in those people who feel
that way, but still, at the crux of it, the
majority of the generation ends up falling to similar trends.
(36:10):
For the most.
Speaker 2 (36:11):
Part, folks, we have markets again touching near all time highs. Here.
We have seen a pretty dramatic shift in the way
interest rates are likely to be headed over the course
of the next few months, and for many the economy
scenes to be at some sort of turning point. If
you are staring down this market and scratching your head
(36:34):
or just wondering what comes next, I'd like to talk
to you about two events that we have the Armstrong
Advisory Group are putting on. One of them is going
to be down on Cape cod the other one in
Chestnut Hill, Massachusetts. The first is at the Margaritaville Resorts
on October ninth. The second down at the showcase Superlux
and Chestnut Hill on October sixteenth, Both of them will
(36:55):
be doing a live broadcast of this show, the Financial Exchange,
followed by a seminar from Armstrong Advisory Group. Join us
for lunch. We'll be talking about all things markets, economy
and what it means for your financial strategy. If you
want more information, there's a ton of it online at
Armstrong Advisory dot com. There's a little banner right at
the top that gives you details on the event. You
(37:16):
can sign up there too, but space is limited for
these events. Again, there's two of them, one on October ninth,
the second on October sixteenth. If you're going to be
in the area and you want to catch a live
version of the show and chat with us after, call
us at eight hundred three nine three for zero zero one.
Check us out at Armstrong Advisory dot com slash events.
(37:38):
But that number once again eight hundred three nine three
for zero zero one.
Speaker 1 (37:44):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (37:59):
As we adhere to the top of the hour, we've
got an incredibly boring stock market. As we close things
out here, the Dow is off one hundred and forty
eight points, or one third of one percent, the S
and P five hundred up six points, less than one
tenth of one percent, and the Nasdaq seeing a little
bit of move to the upside here, up one hundred
and two points nearly half a percent in the trading
(38:22):
so far today. The yield and the ten yure treasury,
a main driver of mortgage rates and other types of loans,
back up over four percent after dipping below there over
the course of the last few days, sitting at four
point zero six four percent, and oil moving up a
little bit on risk of Russian output, up one and
a half percent in early trading. We got a lot
(38:43):
more to cover in the second hour here, folks, stay tuned,
We'll be right back
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