And now we know why it’s been so bad, for so long for interest rates.
For 12 months we’ve been lied to in a major way about particularly important numbers and those lies shaped economic policy. These “errors” impacted you, your business, your family, and your financial future. Mine too. They also impacted our clients, our buyers, and sellers – in a really big way. Sure we have every right to be angry, but it’s probably more productive to focus on what’s next.
Every month we receive the Jobs Report and it tells us how many jobs were added. Job growth is a leading indicator of economic strength. For the past year, the numbers have been really hard to predict and once received, even harder to make sense of. It felt like there was a disconnect. Mainstreet didn’t seem to be rolling in the dough – and by Mainstreet, I mean the people I talk to about their finances every day through the course of my work. But the data kept coming in saying that despite higher and higher borrowing costs, despite tightening from the Central Bank, the money was flowing, and corporations were hiring, and everyone should be happy because the economy is doing great.
It turns out it wasn’t. Or to be more factually correct – there was not as much job growth as we thought. A revision was issued this week adjusting the jobs number down by 800,000. To be extra accurate – 818,000 or if you get your news from social media, one million jobs were cooked up. Yikes. And the news week got busier from there.
Jackson Hole
Powell has finally said it. He confirmed a September rate cut. He didn’t mention the big jobs revision we got this week. But I want to. Specifically because it’s gotten people very heated. I might have gotten you worked up about it at the start of this. It was intentional but also a little manipulative. While I’m not above a good conspiracy theory (check out my latest one on IG, because I am actually pretty fired up about that), I always feel a bit uncomfortable when average folks talk about the way high ups like they are idiots. Stick with me for a moment.
We are in a very politically charged time. I’ve heard people who haven’t gotten into law school, been elected, and re-elected as attorney general talk about what a ditz Kamala Harris is. You’ll likely sit in a room with people over the weekend who have never spoken in front of an audience of any size and listen to them criticize what she says on stage. Now don’t start getting triggered, I’m switching sides. Personally, before I call Donald Trump a moron for stumbling over his words about electronics, boats, and sharks – I remind myself of a few things. 1. I haven’t built a real estate empire (yet). 2. I haven’t been elected president of any countries and 3. I don’t have one of the most recognizable names in the entire world. So maybe I’m not ten steps ahead of this guy and shouldn’t talk like I am.
I’m bringing this around. I promise.
Lately, especially if you are in the real estate industry, you’ve heard people talk about how dumb the Feds are. That they are out of touch with reality and screwing up monetary policy and ruining our country completely. If you’ve been following this blog for a while, you might remember when I talked about how this comes across as a bit pompous. I could sit here and say they’ve made a balls out of tackling inflation. But then again, I’m just a mortgage lender in Reno. Before I run my mouth about how this Georgetown graduate who worked his way up to partner at The Carlyle Group before founding Severn Capital Partners and served in various bipartisan roles for which he received praise from both sides…before I say what a dumbass he is, I try to remember that I graduated from the University of Nevada, Reno and while it may be the Ivy League of the Dessert, I’m still just a loan officer. So I’ll try to remember my station in society.
Why avoid false confidence?
Because it will help you see things for what they really are. Yes – it’s possible Joe Biden cooked the books on the entire economy and forced the Bureau of Labor Statistics to publish blatantly false information about the number of jobs created as part of his conniving plan to be re-elected. We also know that the BLS has been understaffed for quite some time. This has led to delays in data collection and analysis and certainly impacts on the quality of the data itself. It might also be helpful to zoom out and remember this is an annual process where the data is reviewed, every year – even non-election years – and the surveys are reconciled. Without argument, a revision of this nature is alarming but it’s not the first time this has ever happened. In 2009 the revision was 824,000.
Am I trying to minimize this news?
No way. I lived through the consequences of it when I would be talking to so many intelligent people who couldn’t find work, when I was reading about all of the layoffs and trying to get my borrowers a better interest rate – and then the jobs report would come out and smack me in the face. This data being off has major implications for monetary policy but also on all of us at the lower stations and definitely on buyers and sellers out there.
I’ve been scratching my head trying to make sense of this data for the past year. I still don’t think it’s productive to be inflammatory. So instead of the tone I started with, let’s finish with what you and I should actually do with this information that will serve us financially.
Start paying very close attention to jobs numbers. This data will be a major driver of interest rates. If there are concerns of a job loss recession, demand for mortgage bonds should increase and that decreases mortgage interest rates.
Prep time is over. You’ve been gathering information, identifying your markers, and talking the talk for 18 months. Now the strike zone is approaching, and you need to be ready to act. For everyone out there trying to time the market, recommended or not, the knife is about to fall so get your gloves on – I want you to catch it without bleeding.
And lastly, this is unofficial advice but you might remember my concern about what the next few months look like for all of us. Look beyond the headlines and quick clips, the TikToks and the memes designed to polarize and make you think anyone who disagrees with you shouldn’t be your friend or that those guys on the other side are clowns. I’ve got a strong suspicion that neither side really cares about you and me and that it’s entirely on us to make our own lives better.
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