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Inflation Week 

Last week we had the jobs report come in, we were expecting 198k in new jobs but instead saw 275,000.  The funny thing about the jobs report is that next month they will revise it down.  Like January for example, it was revised down just by $50k jobs.  The reason I say it’s funny is because the headline comes out and moves markets and then later, they quietly release a very different, but more accurate number.  That’s weird but we already discussed this last week and there is no answer.  I can’t make it make sense. 


We got CPI Tuesday; it was not a huge market mover, but it honestly wasn’t the news we wanted.  It showed year over year inflation up one tenth of a percent when we're hoping after holiday spending has died out that it would show we were at least where we were last year with inflation, rather than hotter.

 

PPI came in yesterday and it was a market mover.  The hope was for core PPI to come in at .2%, down from January’s .5%.  Literally we are all losing sleep this week over tenths of a single percentage point, but such is our life.  Well, nightmares are real my friends and it came in showing wholesale inflation rose six tenths.  This was the biggest increase on a year-over-year number since September, largely due to a 4.4% jump in energy.   

Retail sales increased a little less than expected, so that’s something.  But then…weekly jobless claims went down.  We are 1 week out from the next Fed Meeting.  It seems a rate cut in March is a no-go and a May rate cut also seems like it’s a long shot.  Internally, we’re being told that June is likely the first meeting of the easing cycle. 


Let’s get political. 

I had an interesting conversation with a friend this week who said she’s going to vote for Trump solely because the economy is in the shitter.  I choked on my Aperol spritz because I’ve been waiting on the edge of my seat for an economic report to show that.  They don’t.  As I just recapped, all the data this week came in showing how great the economy is in spite of high interest rates – how people keep spending money which is why inflation is so stubborn (no matter how much the goods cost, people are still buying them so the producers can keep their prices high) and how less of them are filing for unemployment. 


What is with this disconnect? 

It’s truly mind blowing at this time.  While my friend is wrong about the state of the economy on a technical level, based on facts and data – let’s be honest, in today’s society we couldn’t care less about facts or data.  Since 2019, our economy has grown by 8% - twice as fast as the Euro Zone’s economy and 10x as quickly as Japan’s economy.  In 2023, the economy grew by 3%.  The unemployment rate is below 4% and has been over 2 years.   The S&P has reached record highs 17 times this year, and we are only 2.5 months into this year.    Shit even Bitcoin is doing well – it’s at an all-time high.  The economy is in expansion mode, not the shitter, but that’s just data and facts talking.  Really though, politics and passive aggressive commentary aside, most people feel like my friend.  The borrowers and colleagues and economists I talk to and hear from say that Americans don’t feel great.   


You know my theory. 

Inflation won’t come down because people won’t stop spending money to keep up appearances.  They don’t want anyone to know they are hurting; they want to appear to be wealthy more than they actually want to be wealthy.  The American Dream of homeownership may be fading but the American way of swiping is alive and well.  Just take a look at the Fed’s current consumer debt tracker.  In Q4 of 2023, the most recent period we have numbers in for, credit card balances went from $50 billion to $1.13 trillion. 


Recession vs. Soft Landing Bets 

Jamie Dimon is the CEO of JPMorgan Chase gave some advice to the fed this week, reminding them that their credibility is at stake here.  He said they can always cut fast when the right time comes, but he doesn’t think the time to cut is here.  He also said that even though everyone seems to be betting on a soft landing – meaning the Fed tames inflation without putting us into a job loss recession – at like 70-80%, the odds of it actually being that we don’t end up in a recession are less than half of that.   

All that being said, I’ve personally noticed mortgage applications continue to tick up.  I’ve noticed borrowers are a lot less rate focused.  So maybe size doesn’t matter…if you watched our monthly Property Pursuits market update, you’ll catch my joke.  If you missed it, watch it here. 


I’m definitely seeing that people are done waiting and I’m wondering if we will see sellers follow suit and a slight uptick in inventory, especially heading into the spring/summer buying season.  I’d love to hear your comments below, is the market already heading up where you are?  Are you seeing any more inventory?  What do you predict for this year’s busy buying season? 

 

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