YouSaid · the spoken record

Nick Timiraos

lines on the record: 74
first: 2024-08-01
most recent: 2024-08-01
sittings or episodes: 1
sources: podcast

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“Financial Conditions Indexes, they're really financial stress indexes. You know, the Chicago Fed one that I mentioned earlier, they capture financial stress. They show that financial conditions and air quotes were not tight in June of 2007. Well, what happened three months later, right? It was sort of a nonlinear change there. So the financial conditions indexes, they capture stress more times than they capture actual, you know, like long-term borrowing costs for a mortgage and things like that.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“The housing market, you know, the Fed eased financial conditions too much at the December press conference. That move down was not sustained. So anybody who's bought a house knows, you know, it's not a transaction that comes together in six days or even six weeks. It takes more time. And I think what you've seen is mortgage rates have actually been 7% now, give or take. They've been around 7% for a year. And that's having an effect. I mean, nobody could sit here with a straight face. And even if mortgage rates have come down a little bit, you know, to 6.8% suggest that financial conditions today are dramatically easier than they were a year and certainly two years ago in the housing finance market. That's just not at all what's happening. And so people point to a lot of these.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Right. Yeah, I think that's the right way to put it. I mean, the other one where you see some disconnect, I mentioned financial conditions earlier, and a lot of people look at sort of very, very near-term changes in financial conditions. Oh, since 10 a.m., financial conditions have eased a bunch. So this was all a huge mistake. I mean, the way the Fed thinks about it is the changes in financial conditions. They need to be sustained over some period of time. I like to think about the housing market. If you think about the housing market, you know, the big run up that we had in interest rates beginning a year ago, it wasn't sustained. So it took a lot of demand out of the housing market, but it didn't, you know, we weren't at 8% indefinitely. And then from November to January, mortgage rates came down a bunch from the mid-7s down to maybe six and three quarters. And a lot of people said, oh, this is just going to throw a bunch of gas on the economy. We're going to overheat things.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Right. They're open to the possibility that the interest rate channel is weaker than it might used to have been or that people thought in 2022, but they're not open to the possibility that it has the reverse effect as what the textbook says.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Take more risk, of course. So I just don't, I guess I don't see it. It's not something that people at the Fed talk about. And I think the reason they don't talk about it is because it's not something that really they see is how their policy is working.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. I mean, it's just, you know, they have a view about how monetary policy works and their view is that, you know, kind of there's an equilibrium. And as you raise interest rates, especially in economy that has more debt, you're going to slow. You're going to slow demand. It doesn't mean that some people might not make more income. I think a lot of these people, though, you mentioned Bill Gates. I mean, it's not like he's parking all of his money in cash, right? He's had other investments. He's had other investment income. It does create maybe a lower risk option for people. I mean, I hear from savers who are saying, well, why should the Fed even be cutting rates? I'm finally making 5% on my CD. And I like this. And I don't want to give this up. You could have been making money elsewhere, but you would have had to.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, that happens all the time. I also am not too convinced by the fact that high interest rates are actually stimulative. I think who are the people who are getting all those extra income people? It's wealthy folks. And who are the people who are paying on our average higher debt cost? It's people who have less money, who have a higher propensity to spend. So like if Bill Gates is, you know, used to be getting the Fed funds rate of 0.25% and now he's getting 5.5%. Is that so stimulative to the economy? Yeah, I don't really buy it. But what do you think the Fed thinks or people at the Fed about this?”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I'm not sure. I'm not sure about that. I mean, I'm one person's interest payment is another person's interest expense. So it really should net out unless you're having some different differences abroad, right? Where the interest income is being received domestically and the interest expense is being paid abroad. So a lot of people have said higher interest rates are going to provide stimulus and we'll just have to see. I mean, if the economy and asset markets continue to do as well as they have, maybe that'll be worth more investigation. But in six months, you know, if things are really slowing down, then I think the people who made those arguments are probably going to pretend that they didn't make them.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“People are going to buy fewer houses on credit. People are going to buy fewer cars on credits, but that it more than offsets so that actually high interest rates are stimulative and low interest rates are somewhat contractionary because no one's getting any interest income. I think this is a theory, you know, at first heard about it a few years ago and I associated with a somewhat niche part of the modern monetary theory. But a few months ago or maybe even last year I saw on Bloomberg or CNBC Rick Reeder who runs fixed income for BlackRock, which has trillions and trillions of dollars under management say that he thinks high interest rates are stimulative. So how many of the people that you talk to, economists, people on the street are taking this view very seriously that high interest rates actually could be keeping the economy strong? And is this something that the Fed has, you know, even if they don't agree with it?”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Such a fascinating point that if the interest rate channel is quite weak and a 25 basis point cut or hike isn't worth what it used to be for a variety of reasons. On the way up, it's not going to cause a recession. On the way down if we're in a slowdown or countering a slowdown, it's not going to provide this massive relief. There are some folks, Nick, and I'm sure you've encountered this, who go even further. They say, yes, homeowners have turned out their debt. So so many people include corporations have very long duration fixed rate. They're still paying 2%. They're still paying 3%. Meanwhile, wealthy people who are sitting on a lot of cash, they're getting a high amount of interest income. So really, the banks who suffer, but the American consumer is strong, that that force is so strong that not only does it somewhat offset the fact that credit is more expensive and that”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“That three or four cuts here, well, that'll fix everything. But what if policy, and I wrote this in my story yesterday, I quoted somebody making this point, that what if to actually provide stimulus now, the policy transmission mechanism is just as weak as it was on the way up? I mean, there's like 15 of us, I'm exaggerating here who have bought houses in the last 18 months. There's not a lot of juice to squeeze out of the refi channel, for example. So I hear people making these points and I think they're interesting questions is, you know, how much, if the FedEx actually did need to provide stimulus, which is not something that they need to do right now, but, you know, if our stars shifted up a bunch, then yeah, that's maybe you don't have to cut as much to get to neutral or below neutral, but if there's actual weak.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“My favorite are the ones who are like, don't they know this? Haven't they even considered this? And it's like, you know, they probably have. They just don't put the same weight on it that you do. For me, I mean, for me, the big question, I think, over the next year, especially if we do see more softness, there's been so much discussion and analysis of why monetary policy transmission, why the economy was more resilient to it, why the transmission didn't, you know, if you had gone back two years and I'd been on your show and I'd said, they're going to raise rates by 500 basis points in less than 18 months and the economy, at least for a couple years, is just going to be fine. People would have been like, what are you talking about, right? People thought 300 basis points in early 22 was going to do a lot of damage. So the economy has had these buffers. People turned out debt, businesses, and households turned out debt. I wonder about what happens if things slow down. Everybody sort of assumes.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I'm sure you're absolutely bombarded. And just moving on from politics, it really is true that there's always going to be a piece of economic data that confirms you. I mean, I'm sure even in the deep semi-depression, one month recession of March or April 2020, I'm sure you can even find a data point that looked okay. And data points in the boom of 2021 that looked horrible. You can always cherry pick data to find something that confirms your view. And you're someone who's stuck in the middle between talking to professionals who have a view, but also just people who are, you know, chiming in and saying, yeah, look at the Chicago. Nick, are you not paying attention to the New Orleans freight index? Come on.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“What happens on the economy is going to matter so much more. And, you know, there are a lot of people who tell me, I mean, people are messaging me on Twitter. What do you mean they're going to cut financial conditions or loose the Chicago good, you know, FCI is right where it was before they even hiked? How can you, you know, so and then there are other people who think the Fed is falling behind here and those people reach out to me too come you didn't ask a harder question why aren't you cutting the economy? I think that's going to be what drives what drives a lot of this.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“He said he wouldn't keep Pel. This is what I want on interest rates. Go get whatever you need to do. I mean, I'm not sure that he's steeped in who has a vote and how many people vote on the FOMC. I'm the president. I should be able to have some say in this. It's kind of crazy that I don't. So you're the chair. Go make it happen. I mean, it seems to me, just from having watched the last five years, that's what Trump wants from speaking to people around Trump. That's what Trump wants. And the question will be, you know, can he find somebody that he thinks will listen to him and that the Senate will confirm because, you know, there are people in the Senate who don't Republicans in the Senate who don't like the idea of a president calling up the Fed chair and saying do this, do that. That scares some Republicans on. So there's a lot there. I still think that it just.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Governor, but you could maybe demote a chair and pick somebody else to be chair. Well, there's a full board right now. And the two people besides Powell that Donald Trump put on the Fed board have been hawkish, right? Mickey Bowman and Chris Waller aren't exactly Uber dugs over in the Martin building right now. So I just, I think some of this stuff, I mean, yes, you have to take seriously what people have said in the past, what advisors around him are telling them. Yes, you can do this, boss. You can can the guy if you want to. Put me in the game. I'll give you the policy you want. But I really think this is a bigger focus. If he wins, the big focus will be on who he picks to replace Powell and to put before the Senate in May of 26.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“And what Trump was kind of saying was, no, that's not the plan. But one role of Trump is he's never going to tie the hands of a future Donald Trump. So it'll be situational what they do. I mean, he was not shy in 2018 and 2019 and even in 2020 about browbeating the Fed publicly calling for lower interest rates or negative interest rates or Huey, whatever he thought he needed. He would push for it. He thought it worked. I think that's important to remember, even though it's not at all clear that that was why the Fed cut rates in 2019, if that's what the president thought, then it means he'll probably do it again if he thinks it will help him. When people talk about firing the Fed chair, I think a couple of points. One, you know, the way that people who think it could be done, what they point to is you would just pick somebody else on the board since you can't fire.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Know, I just think it's going to depend completely on what the economy looks like at the time when that happens. So, you know, Trump gave this interview to Business Week, Bloomberg Business Week In June he was asked Are you planning to let JPL stay as fed chair? It's not at all clear that he has the authority to fire the fed chair without cause. But nevertheless, he was asked the question and he said, yes, I would keep him, but then he went on yet at an if. He said, if, especially, you think he said, especially if he's doing the right thing. Well, if you promise somebody and then you say if, you know, if my kids ask me, can we get ice cream tonight? And I said, yay, yes, if you eat all of your vegetables and fruit, I mean, that's not really an unconditional promise. So people ran with it and said, oh, he's promising to keep Powell. He's not going to try to push Powell out. I think, I mean, my read of Trump there was he was saying pushing Powell out is not on my first 100 days agenda. Peter Navarro, I think, had given an interview and he had said, oh yeah, Powell's gone, you know, on day one.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think it's safe to say we've probably never had a president who understands better the impact of 25 basis point increase or decrease in overnight borrowing costs, right? I mean, this guy, he made his money in real estate. That's where he started out.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and it is my perception, and I'm curious if you agree with me that I've heard President Biden say very little about interest rates, maybe one or two comments. And quite publicly, he has not met with JPAL in quite some time. I have not been following Vice President Harris's views on this, and I'm sure we will see her views. former President Trump, it's my perception, he really, you know, as a former real estate guy, he really likes low interest rates and he's very, he pays attention to them, probably a lot more than Joe Biden does. And, you know, if for Trump is re-elected in November, he might be calling and perhaps on Truth Social, if not behind the scenes for lower interest rates.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“And then, you know, he wanted interest rates to be lowered. Now, granted, the Fed had hiked some. I think they had done raised rates by about a point since then. And then he started to say, I don't like this anymore. Let's not keep raising the interest rate.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“For the Fed that just goes way beyond which meeting do they do this and do people accuse them of politics? Because they're going to get accused of bad things probably no matter what they do. But a lot of it will fade away if the policy ends up looking okay or the economy just does okay. Another example would be in 2016, remember, they had lifted off, they had done one increase at the end of 2015 the September meeting, there was a big debate. Should we do another one here? They waited. They did it in December of 16. But when they didn't hike, Donald Trump went out and said, Janet, yelling, she's so political. She's doing this to help Obama and to help, you know, help the Democrats here. It's a big fat bubble ready to pop and they're holding rates lower to help my opponent. And nobody really talks about that now.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“If you think you have to do it in September to achieve that, that's, you know, nobody's going to be talking about the election and what you did right before the election a year from now if the economy is doing well. And whether you cut this meeting or that meeting, if the economy's in recession, you're going to have much bigger problems a year from now. I mean, I wrote today that even though people close to Donald Trump have signaled that they're just going to be irate if the Fed cuts interest rates in September, if you think about it, a lot could be forgiven. You know, if Donald Trump wins, if he's elected the president, he's going to want lower interest rates. I mean, I think he said that in a rally on Wednesday, the first thing I'll do is we'll get on top of inflation and we'll get interest rates down. So, you know, presidents want a strong economy, incoming presidents are going to want inherit a strong economy. I think there's a lot at stake here.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Well, in a perfect world, they would love to just be a complete wallflower and have nobody here wondering what is monetary policy going to do. I mean, the last place they want to be would be a situation where you're talking about, you know, extremely urgent intermediate cuts or something. I'm not suggesting that's on the table right now, but you wouldn't want to have to be, I mean, look at 2008. That's a perfect example. You don't want to be running around doing things right before the election, but you also don't want, I mean, they have, they think they have a chance here to pull off a soft landing, not saying it's the base case, not saying it's going to be easy to do. They may have already missed the landing strip. A number of the analysts I talked to think they had a chance and they're missing it right now, okay? Fine. Whatever you think that, you know, to be able to achieve that.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, you've got the data to back that up. So I was never convinced by the course of people who say, oh, yeah, they're definitely going to cut because they want to help the Democrats. I never bought into that. I did explore the possibility that it would just be clean if the cutting rate cycle started after the election in December and that the members would never do something to help the Democrats or helped one particular party. the Federal Reserve does have an interest in not only it being non-political.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Or $3 trillion of spending that they would get the next year on the horizon. So this idea that the Fed doesn't do anything in election years, it's simply not true.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Obviously, the Fed was doing a lot in 2008, 2012. They launched QE3 in September before President Obama's re-election. And then 2020, they unveil the guidance. And a number of Fed officials were actually calling for more fiscal spending because they're worried that they're out of juice. Nobody sees a vaccine.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“To cut. And you can actually look in the transcripts for that meeting. The interview that the president gave, it indirectly comes up, Larry Lindsay, who is a Bush appointee, a governor, says, you know, part of me wants to come in and just stand tall and say, we're not going to do anything here, or maybe we should hike. But the other part of me thinks it actually is the right decision to cut. And so I'm going to support the cut. So that's 92. You know, 2000, the Fed hikes to six and a half percent Fed funds, a nine-year high in May, the equity bubble bursts later in the year and Bill Clinton's last two weeks as president, the Fed is cutting. They do intermeeting rate cut on the third day of 2001. 2004, the Fed starts their hiking cycle in June 2000.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Because if you think this is the right thing to do, you're going to do it. I think is interesting just because it starts the day after the election. Would you really want to make that be your first cut? There's no getting around. It's just an awkward meeting. But all the more recent, I think, for people just to be out there communicating what they're doing and why. And I wrote a story about this today in the journal. You go back in history. I mean, people tell me the Fed never makes policy changes around an election. And that's just not true. In 1992, George Bush gave an interview to the New York Times about a week before the July Fed meeting saying, I think we need lower interest rates. And knowing the Fed was meeting the next week, the Fed cut by 50 basis points at that meeting. They had already cut a lot. We were in the 90-91 recession. We were coming out of it. We weren't coming out of it in enough time for George Bush to be able to present the economic story he wanted to tell.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“The policies that these people could enact. I mean, that is a conversation for 2025. The policy outlook, depending on who wins, could change the economic outlook, but the Fed doesn't really focus on that until the elections decided, and then the new president says, here's what I'm going to do. Here's what you think is going to pass Congress. You can see how the Fed then begins to take that into account. Does it make the communications high wire act harder for the Fed? Of course it does. I'm not going to sit here and say it has no effect. But I think it's hard to point to ways in which that it's actively influencing their decision right now. A few months ago, people said to me, there's no way they'll go in September. And now the market has a September cut completely priced. Does it maybe change where the bar is for some of these things? You could argue that. I don't even think that it does.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Off those views. But you can. You can read the transcripts, you see that it really doesn't come up. You can look at the arguments that people outside of the political realm have right now. I mean, there are arguments on both sides here for and against cutting rates. And so I don't think it has to be seen as a political thing. But because there are people who just will refuse to believe it couldn't, you know, it's so obvious to me that they shouldn't be cutting. So it must be politics or it's so obvious to me they should be cutting. So it's politics. You can't, I mean, I'm not sure what you can do to convince those people. So Powell yesterday I talked about the binder earlier. I mean, he definitely had something ready to go on when he said, you know, we don't make decisions to help or to hurt a political party, a political candidate. He went out of his way to say we're not even thinking about.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Fireside chats almost in between every meeting. And he's always done this sort of thing. He communicates. I think he sees that as an important part of his job to make sure people understand what the Fed is doing why and why. But when I say elections matter, I think they matter because you just know that no matter what you do, people are going to wonder if politics are influencing it. So it puts a premium on being out there and reminding everybody that, you know, hey, if we cut rates, there are good reasons for doing it and here are what those reasons are or for hiking rates. This is why so that there are going to be people you can't convince, of course. There are some people who just believe the Fed is political and maybe they think the Fed is, you know, kind of subconsciously political. We're all humans. We all have views about things and how can we actually expect to be able to turn.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yes, people will accuse him of playing politics. And no, I don't think the Fed does things for specifically partisan political reasons. I think there's too much at stake here. And I think all the people who work on this recognize what's at stake here. And so a lot of times when I see people have their Fed call or whatever and they say, well, they're not going to cut in September because there's an election. I sort of like, okay, thank you next. I'm not. That analysis doesn't do anything for me because I just don't see any evidence that the Fed thinks that way. That doesn't mean that elections don't matter. I mean, of course elections matter. And so I think what it does is it puts a premium on communication. I mean, the Fed chair has been speaking a lot this year. He did 60 minutes in February. He's done.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“It's down 13% of residential construction hiring over that six-month period. It's up 4%. Maybe it's not one for one in terms of construction units and jobs. But you have to wonder if maybe that was just a lag, right? That was just something different about this cycle that sort of buffered or attenuated the transmission of higher interest rates into residential construction. But maybe now you're seeing it. And that would be a reason not to ignore the SOM rule here, even though maybe the first 30 basis point increase in the unemployment rate last year wasn't quite as alarming.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Then lumber and brick, single family homes. And so there was a lag built in there. And now what you're seeing is that completions are plummeting for multifamily. Of course, they are nothing's being started. Permits fell a while ago. Permits and starts are very low. Now those completions, you know, those buildings are being delivered. And so where are the people who are building those buildings going to go? Perhaps they go into energy sector or they go build new battery or chip factories that are being built. But you now see residential construction total units which plateaued in 22. It held steady in 23. It wasn't going up, but it wasn't going down. Total units under construction. It's now falling. It was down 8% from a year ago in June. I think if you use a six-month annualized rate.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“One of the reasons that people cited a couple years ago that made a lot of sense to me for why there was this big question, why haven't 400 basis points and then 450 basis points and rate hikes so the economy, the housing market was much more resilient than anybody anticipated? And you can point to certain factors on the single family side that many people are familiar with, supply of homes was low because people, there was such a bad affordability shock. People didn't want to move. And so even though demand was weak, supply was also weak and the new home market benefited from that. And that's where, you know, that's where housing punches its weight in GDP is in new construction, not in resales. But you also had a lot of multifamily construction and multi-family buildings, steel concrete apartment buildings. They just take longer to get built.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Employment rate went up, but it was all 20 to 24 year olds. And some people said, well, don't worry about that because it's just 20 to 24-year-olds. I know that other people saying to me, well, wait a minute. If new workers, people who are sort of entering the workforce are finding it harder to get a job, doesn't that tell you something about labor market conditions? You can't just dismiss arising the unemployment rate because it was from this one group. Yeah, it could be volatile, but it could also be telling you that the layer market's softer. And I'm sure these are things that the economists in the research and statistics division at the Fed board are doing a lot of analysis on and trying to figure out what's going on there. The other thing, so the reason I said the reason why the Psalm rule would be tribute matters. And I mentioned, you know, manufacturing and residential construction.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“That downturn sort of filters through to the rest of the economy, and then the unemployment rate goes up even more. Initial increase in the unemployment rate last year, you weren't seeing a lot of job losses, you weren't seeing U3 as the unemployment rate that everybody talks about. U2 is the unemployment rate that just looks at people who are laid off. And it hasn't gone up as much. So what I'm watching right now is, and I think what everybody else is watching, is, well, what's actually happening with layoffs? If new entrants to the job market or re-entrants to the job market or finding that it's harder to get jobs, you know, it's taking longer to get jobs. You know, maybe it's not as worrying as people losing their jobs, but it's a sign that demand for labor is not as strong as it was. And if those trends continue, then it would suggest people will start to lose their jobs more than they have. I think one of the months maybe May was where the unemployment.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, the thing about the unemployment rate is really the immigration thing should be sort of agnostic to the unemployment rate. And you kind of, I think that's why a lot of economists see the unemployment rate as the one single indicator that gives maybe the best read on what's happening in the economy. You're adding a lot of jobs, but the unemployment rate's going up. So that's telling you something about the economy. Now, I think, you know, when it comes to the SOM rule, I think the reasons why the unemployment rate rise matter. Normally what you see, I mean, normally the reason the POM rule is a good kind of coincidence indicator or warning siren on this stuff is because you see layoffs rise in the cyclical industries, right? Construction, residential construction jobs are lost, manufacturing jobs are lost, unemployment rate starts to go up a little bit, and then”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Traditional economic models, old school models of the unemployment rate going up in an exponential manner is very concomitant with a recession But what about one in which the unemployment rate jumps up, but it's because job growth remains moderately good, but just the labor supply, the denominator explodes because of huge amount of immigration? What if the sum rule is triggered? For our audience, that unemployment rate measure of how the unemployment goes up in a nonlinear fashion, but it's only because the labor supply has exploded because that a recession did the economists that you speak to, is that a different type of som rule, a sommel trigger that didn't count? And the same with the yield curve trigger ended up being wrong. I mean, I clauded Som herself has said that she hopes it will be wrong, that there's a chance it'll be wrong.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“To last year, people had around well, how is the economy? How is demand so strong? But we see labor market not overheating and immigration sort of helped unravel that mystery.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“They have to make certain assumptions around business, new businesses that are created. You can't survey businesses that you don't know have been created. And then businesses that close. That's called the birth death modeling. So it can add or subtract. It can, in different months, to employment. And so if you're getting that wrong, maybe you're over estimating the number of jobs you've created. On the other hand, if you're not counting all the people coming, if you're not accounting for all the people that are coming into the country, then the household survey might be undercounting job growth over time, these things should net out. But I mean, you're right. It's just, it's created. I think the post-pandemic economy has had a number of these things where you kind of have to sit back and say, oh, I wasn't expecting this now. That sort of, it sort of explains this conundrum, you know.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“So that's been a question, could immigration explain some of the differences in the survey of employers, that's where we get the monthly employment numbers, which has been, you know, that's showing we've added 2.8 million jobs over the last year versus the household survey where we survey households and use population estimates to calculate changes in employment or unemployment. And that's been almost flat, as it suggests we've added fewer than 200,000 jobs. And so unemployment, sorry, immigration might explain some of the difference. We may be overcounting, I think, at the last press conference or maybe the one before Powell acknowledged we might be overcounting in the survey of employers, the payroll survey, because there's estimates.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“And so the labor supply is how many people are willing to work. So unemployed people are people who are looking for a job in the labor force but are not employed. And that is in the numerator of the unemployment rate. The denominator is the total amount in the labor force. So an influx in immigration, which appears that people have been coming to the U.S. a lot, increases the labor supply and therefore the number of jobs that the U.S. needs to add every month. called the break-even rate, that is higher. So now because the labor supply is increasing, we need to hire more and more people every month in order to keep the unemployment rate constant. Do you think that immigration, does that also boost the non-farm payrolls data just because there are more people so there's more hirings?”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“And so I think that is creating just an additional complication perhaps to reading some of the layer market data. And on top of that, if you look at Department of Homeland Security data, border crossings have come down a lot in the spring. And so you have to wonder, does that mean that the labor supply boom that we enjoyed over the last 18 months, whatever you want to call it, is that now going to an end?”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“That suggests the break even rate of monthly job growth normally would be below $100,000, sixty to seventy thousand. But right now, because of higher immigration, it could be closer to 200,000 earned Tedeshi at Yale University, former CEA staff in the Biden administration. He thinks the break-even rate could be even higher as high as 300,000. And you've seen Fed officials over the course of this year sort of react normally if you thought break even was 60,000 and you're having 250,000, 230,000 jobs at an every month, you'd say, wow, that's not, you know, that's tightening resources here. That's going to put some heat on the economy. They're not talking about that anymore because I think they've been internalized this idea that there's just more labor supply.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“Again, there are only three people who think the unemployment rate will go higher than it is right now, and there are only four people who think that their forecast risks are to the upside. That means there are a lot of people who might be surprised here to see the unemployment rate continue to rise. Now, maybe I'm overdoing this because if you look at 2025, there are more people who see the unemployment rate going up next year. So maybe this is just happening sooner than they expect. But I think there's a little bit of a it's something to watch there. As to your question on what they're watching in the labor market, I think one of the very interesting stories of the last 12 months has been immigration. And so that has clearly made that, you know, you can see how people have now changed their views of what the break-even level of job growth is to sustain the unemployment rate where it is. There's research at the San Francisco Fed.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“I don't know. I mean, that is a good question. I want to go back to something you said about the SCP. So you're right. And Colby was right. The June SCP, there were three participants. You can go into those tables in the back of the SCP. There were three participants who thought the unemployment rate would end the year above 4.1%. There were four participants who thought the risks to whatever they wrote down for the unemployment rate were weighted to the upside. Everybody else thought they were broadly balanced. So to me, that suggests, you know,”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“But just how weak or just how not strong is the, do you think the Fed thinks the labor market is and what pieces of data? Is it the unemployment rate? Is it non-farm payrolls, which is a lot stronger? Is it Jolts? What part of the data are part of that image that the Federal Reserve is paying attention to that says, hey, this job market, it is not as strong as it was in 2023. It is not as strong as it was in 2022.”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT
“So, focusing on the dual mandate, saying that the risks are in better balance and that there's an upside risk of inflation, there's a downside risk of unemployment. We are now focused on both. Now that inflation is closer to 2% and the unemployment rate is rising. As I believe, the great Colwyn Smith asked and pointed out, the uncurrent unemployment rate 4.1% is above the submary of economic projections. thought it would be by the end of the year indicating that I think as I think you indicated earlier that the unemployed rate is going to decline from 4.1 percent to 4 percent um but as you know often when the unemployment rate goes up it continues to go up and then it has this pattern um it could be that the received wisdom that pow talked about in the same way you know the the inverted yield curve has been flouted that this will be flouted too the unemployment rate could could go down”
2024-08-01 · Forward Guidance · Following The "Fed Breadcrumbs" | Nick Timiraos on “Not Hot At All” Labor Market, Interest Rate Cuts, and Fed’s Collision Course With 2024 Election · IDENTIFIED FROM THE TRANSCRIPT